Government has tasked the central bank to reveal individuals and companies that were allocated foreign currency at par with the country’s surrogate currency from October last year to February this year amid indications that beneficiaries exploited arbitrage opportunities on the parallel market, Business Times can report.
Government effectively abandoned its monetary policy which pegged the bond notes and bank balances at 1:1 with the dollar as companies struggled to access the greenback from the formal banking system due to a hue discrepancy with the parallel market.
Before this policy change, which resulted in managed trades of foreign exchange, the central bank had full control on the allocation list of foreign currency beneficiaries. Now exchange rates are trending around 1:4,9 on the parallel market compared to 1:3,5 in March triggering a wave of price increases on basic commodities.
Authorities suggest that individuals, civil servants and workers do not have extra money to buy forex after deducting all essentials’ costs given the skyrocketing cost of living.
Consequently, government wants those who benefitted to be investigated to see if they have utilised the money for the productive sectors. Sources told this publication that the Cabinet has given the Reserve Bank of Zimbabwe (RBZ) a period of up to a month to come up with a complete list to vet if the companies really put the money to good use.
“Last week, Tuesday, Cabinet and other powerful government officials tasked the RBZ to come up with a list of all companies and individuals who were allocated forex on 1:1 basis for their respective productive sector to check if the forex was utilised accordingly or for other purposes.
“It is believed that some companies which benefited forex from the central bank are no longer using that money for the manufacturing sector or whatever productive use but are taking the money to the streets for selling,” a source said.
“Therefore, these companies and individuals will be investigated and if found guilty, stern punitive measures will be put in place to deal with them. RBZ was given a month to complete the task.” Since October, over US$800m was allocated to companies and individuals.
RBZ governor John Mangudya said the bank has allocated forex to companies in the productive sector and there was need to see how the funds were utilised.
“Given the demand for forex, there is need to check the progress of how the forex was used by various companies for auditing and accounting purposes. However, as for me, there was no official word from government or cabinet as far as provision of forex allocation
list is concerned,” Mangudya said
“I can’t deny or accept that there was communication of that sort to my team as Cabinet or government sometimes directly tasks the Exchange Control Department to do so. I shall investigate if they were approached by authorities or not.”
The biting foreign currency shortages have seen companies procuring the greenback from the parallel market to import raw materials. This has pushed up the cost of production which is passed on to consumers through a spike in prices.
Cooking oil companies like Olivine Industries and Surface Wilmar have closed shop due to high cost of business and crippling forex shortages.
Basic commodities have trebled with 2kg sugar going for ZWL$6 from ZWL$2 in October and two litre cooking oil to ZWL$13, 50 from ZWL$3, 85 in October. Many companies are distressed by severe hikes in operational costs which continue to be on upward trajectory this year, are teetering on the brink of collapse after a runaway cost-push inflation.
During Tuesday’s post cabinet briefing, Information minister Monica Mutsvangwa told the journalists that the government will continue to access more credit lines for industry to produce enough food for the country.
Starting this month a significant amount of forex is expected to help the manufacturing sector to increase production levels