Of promises and lies
Zimbabwe’s largest business grouping, the Confederation of Zimbabwe Industries (CZI) wants the foreign currency auction system to be suspended and resume after a backlog of over US$300m has been cleared.
It also wants the central bank to auction what is available and for the product to go to the highest bidder like what all auctions do.
It said the fact that bids are pro-rated means that the economy has lost the near convergence position that the auction had achieved in the beginning, adding that trust evaporated “especially after several promises of clearing the backlog and this is to companies that are still trying to find solutions to legacy debt of yesteryear”.
The Reserve Bank of Zimbabwe insists the auction is here to stay and has played a role in giving companies access to foreign currency to import raw materials and machinery. To the central bank, the CZI letter creates a “negative impression that has the effect of stocking market confusion and inflation”.
Central bank chief John Mangudya says the CZI should have engaged the central bank to first establish the veracity of the rumours that motivated the paper.
What is lost on his part is the fact that business and the government have been meeting since last year to jaw-jaw over the economic crisis with the auction system being topical in those discussions in light of a surge in parallel market rates.
It seems these meetings have been talk shows after the monetary authorities failed to ensure the allotment backlog has been cleared. As one industrialist remarked this week, “business is tired of government’s promises and lies”. He could not be far off. Early this year, the central bank said the auction backlog would be cleared by the end of March.
The deadline passed unnoticed by authorities. Two weeks ago, the government announced that the backlog would be cleared by the end of the month. This too will be missed which frustrates business to the point of going public on the problems they are facing, using the CZI letter as a latest example.
The wheels seem to be coming off with inflation sprinting towards three-digit levels for the first time in more than six months. Annual inflation for April raced to 96.4% from 72.7% in March. This rise is attributable to the exogenous factors such as the global price increase arising from the Russia-Ukraine war. It is also being fuelled by the galloping parallel market rates as the auction struggles to allot.
The economy is in for a bumpy ride and no amount of burying one’s head in the sand by the government will change the situation overnight. To jaw-jaw with the business community is better than to war-war.
