Reserve Bank of Zimbabwe (RBZ) governor John Mangudya made a bold declaration this week: the bank is committed to deal with the funding backlog of foreign exchange allotments and take appropriate measures to ensure that the backlog does not recur.
The Bank also committed to refine and streamline the foreign exchange auction system to ensure that it continues to play its price discovery role in the foreign exchange market.
The commitment came amid delays by companies in getting the foreign currency allotted at the auction system amid claims that companies were taking more than two months to access the forex when they were supposed to buy raw materials required for production.
This has seen companies going to the alternative markets fuelling volatility in the parallel market exchange rates. Authorities believe the volatility was due to behavioural factors.
Monday’s no holds barred meeting involving RBZ, the finance ministry and business leaders was a welcome move.
Last month, we implored the central bank to elicit views from the business sector to make the system work again and help stabilise prices.
The commitments from the indaba showed that the views of business had been taken on board by RBZ and vice versa.
We contend that such meetings bring quicker results than the naming and shaming of parallel market dealers which is akin to a wild goose chase as it addresses the symptoms and not the disease.
In our editorial last month, we called for the refining of the auction system for it to play its critical role. On Monday, the RBZ committed to refine and streamline the foreign exchange auction system to ensure that it continues to play its price discovery role in the foreign exchange market.
The recent spike in prices due to the volatility of the parallel market exchange rates requires all hands on deck at a time the majority of citizens are living below the poverty datum line.
The increase in annual inflation last month could have come as a shock to authorities but was expected as parallel market rates headed north. For the first time in 13 months, annual inflation rose to 51.55% last month from 50.24% in August.
The Bankers Association of Zimbabwe is committed to ensuring that all bids submitted to the foreign exchange auction are authentic, continued due diligence on all their customers and applications for foreign exchange and refraining from facilitating parallel market transactions through matching.
Bankers also committed to improving efficiency in facilitation of Letters of Credit, enhancing reporting of suspicious transactions and promptly implementing regulatory directives on freezing of bank accounts for participants in illicit foreign currency transactions, among others. Banks have taken the flak for being a conduit for illicit transactions with critics accusing some banks of sleeping on the wheels in terms of KYC.
Retailer associations requested the government to level the playing field in their respective operating environments by attending to the menace of foreign currency traders milling outside and around shops and trading areas, identifying and bringing to book funders of foreign currency traders and dealing with informal traders operating without licences and sometimes outside legal or policy parameters. After Monday’s commitments, it is time for the parties to walk the talk.