‘Rocketing exchange rate not reflective of economic fundamentals’

PHILLIMON MHLANGA IN VICTORIA FALLS

The Reserve Bank of Zimbabwe (RBZ) on Friday said rocketing parallel market exchange rate is not reflective of the economic fundamentals of demand and supply.

Zimbabwe has in the past weeks  experienced punitive exchange rate  in the parallel market. The exchange rate  in the parallel market is hovering around  ZWL$180:US$1 . At the auction system the exchange rate is ZWL$97:US$1.

However, the majority of  local firms use the parallel market rate to price their goods and services.

Consequently,  prices of goods and services have skyrocketed to the extent that they are now beyond the reach of many Zimbabweans.

But, the RBZ deputy governor, Kupukile Mlambo, who spoke at the CEO Africa Roundtable Conference in Victoria Falls said the economy was generating sufficient foreign currency. He said the demand, however, was ‘artificially’ too high.

“Resurgence in high parallel market premiums since June 2021 is not reflective of economic fundamentals,” Mlambo said.

He added: “The economy is generating sufficient foreign currency to stabilise exchange rate.

(But), the demand is artificially too high due to store of value considerations and speculation.”

Mlambo said the auction system will continue providing uninterrupted supply of foreign currency to the productive sector.

He said over US$2bn has been dispensed since the start of the auction system in 2020.About 70% , Mlambo said has gone towards the productive sectors, including capital and equipment and raw materials imports.

Mlambo said the interbank foreign exchange market traded about US$942.1m over and above the auction.  This amount , Mlambo said excludes foreign exchange traded by Bureaux de Change. Cumulative outflows amounted to about US$934m, he said.

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