Going back to basics
The Reserve Bank of Zimbabwe (RBZ) met business leaders last week to take stock and review resolutions and commitments made at their meeting of October 11, 2021 and come up with mechanisms to enhance price stability.
Such rapprochement is commendable given the animosity that has existed between the government and business with the former accusing the latter of harbouring a regime change agenda, especially in the days of the previous administration.
It also came after the central bank has accused some business players of abusing the foreign currency auction system by flooding the platform with briefcase companies.
The business players were also accused of pricing above the auction system despite getting foreign currency from the platform.
At the meeting, it was resolved that the government and the central bank should come up with strategies to enhance the attractiveness of the local currency and strengthen its demand in the context of the multicurrency system currently in place.
RBZ was also implored to continue to refine the foreign exchange auction system and to timely fund auction allotments in line with the auction rules.
The parties agreed there was need for collective responsibility, exhibit good leadership and exercise restraint on the volatility of the foreign exchange rate.
It was also resolved that the relevant regulatory authorities should continue to carry out enhanced due diligence on auction participants and to monitor the use of funds obtained through the auction and come down strongly on those who submit fake documents (including invoices and bills of entry) and resort to suspension for periods not less than 6 months and blacklisting.
Banks were reminded not be complicit with their delinquent customers.
It was agreed that continued dialogue between the authorities and business remained paramount in order to maintain the momentum of stabilising the rate of inflation, the foreign exchange rate and the economy in general, as well as building confidence in the local currency.
The challenges confronting the economy require all hands on deck. That era of threats is long gone and to jaw-jaw is better than to war-war especially as the nation faces an election in a year’s time.
Politicians have in the past used business as cannon fodder to curry favour with the electorate.
As history has shown that, such populism has negative consequences which are being felt today. But this does not give carte blanche to errant businesses. They have to be disciplined within the confines of the laws.
The parties agreed last week that the Financial Intelligence Unit should continue penalising currency manipulators and abusers of foreign currency auction rules and breaches of the Bank Use Promotion Act.
A business-friendly environment is key to catapult the economy to over 5% GDP growth this year. That business-friendly environment is created from engagement or no-hold barred meetings and not from threats and Statutory Instruments. The existing harmony is credited with the stability that has been witnessed over the months with inflation ending the year at 60.7% in December down from 348.6% recorded in December 2020.
