
Rutendo Nyeve, Sunday News Reporter
THE Government has said it is fully aware of the economic pressures pushing up the foreign currency exchange rate and destabilising prices and is putting all hands on deck to find a concrete solution to lift the burden off the country’s citizenry.
The increase in the exchange rate, especially on the black market that has however, been adopted by most businesses, has been attributed to the decrease in foreign currency inflows during the festive season. The Government has, however, assured the nation that the phase was going to pass at the back of the commencement of the Reserve Bank of Zimbabwe (RBZ) auction system this week that is expected to stabilise the exchange rate.
In an interview with Sunday News yesterday, the Deputy Minister of Finance, Economic Development and Investment Promotion, Honourable David Mnangagwa, said Treasury was fully aware of the exchange rate volatility and was working on it to find a concrete solution to the undesirable phase.
“As Treasury we are fully alive to the economic environment currently prevailing. We will not go into debate as to what the causes are, whether it is speculative, fundamental-driven, mischief or a January rush phenomenon, but what is of concern is that it is happening and I can assure you we have our fingers on the pulse. The Ministry in conjunction with the monetary authority are plotting a concrete solution so that we can move past this undesirable phase,” said Deputy Minister Mnangagwa.
Honourable David Mnangagwa
The interbank rate has also been on an upward trend over the past two weeks. According to the Reserve Bank of Zimbabwe’s International Banking and Portfolio Management released exchange rates, US$1 was ZW$6 192,4022 on 2 January. The exchange rate, however, moved to ZW$8 331,6206 for US$1 as at Friday 12 January.
Economist and Reserve Bank of Zimbabwe (RBZ) monetary policy committee member, Mr Persistence Gwanyanya also weighed in saying the volatility was caused by low foreign currency inflows.
“The inflows of foreign currency have slowed down in the last quarter of the year and this is attributable to the softening global commodity prices given Zimbabwe depends 85 percent on mineral exports. Naturally, because of that unhealthy concentration in our economy we are always found in this position when global commodity prices soften. But this coincides with our traditional weak period which is the last quarter of the year.
“In the last quarter of the year, supply of foreign currency naturally dips because tobacco inflows would have ceased on closure of tobacco auction floors (tobacco selling period). The supply also dips because demand for foreign currency would have increased on account of agriculture imports and stocking for the festive season. So traditionally this is our weak period,” said Mr Gwanyanya.
He said traditionally because of the rains, mining revenue would have also gone down.
“But we did not receive rains during that period, but even if we did not receive rains, it coincides with the normal shutdown of mining entities.”
Mr Gwanyanya said going forward, they do not want to focus on problems but on finding solutions.
“You would know that all the mentioned problems above happen when the auction system would have closed and this is where the rest of the economy normally sources foreign currency. So the solution is, the auction is probably opening this week and we expect that it absorbs some pressure on the foreign currency,” said Mr Gwanyanya.
He said it is possible to get the situation back to normal with the rate going down, like what happened in May last year. — @nyeve14