Zimbabwe's Parliament remains unconvinced over exchange rate 'stability'

03 Octobre 2020

Harare, Zimbabwe, October 3 (Infosplusgabon) - The Zimbabwe government will next week introduce a programme identifying different exchange rates to weed out businesses that continue to use unofficial forex rates.

Due to limiting daily monetary transactions, curbing mobile money agents, COVID-19 restrictions, and controlling the reserve money, demand for the US dollar has slowed.

As a result, the Zimbabwe dollar (ZWL) has seemingly ‘firmed’ to ZWL81.74 against the greenback, though economists remain cautious about this development as the currency has not strengthened on fundamentals -- market confidence, foreign currency or commodities.

Despite the ZWL firming, while price increases have largely slowed, many  businesses still use either the parallel market exchange rate of US$1:ZWL110 or their own significantly higher rates to price goods or services, making them expensive.

This is why during a parliament sitting on  Wednesday, Zimbabwe's legislators grilled Deputy Finance minister Clemence Chiduwa to explain why prices are not reflecting the ZWL 'stabilising'.

“What plans does the Government have with regard to the exchange rate of $81.44 RTGS to US$1 being used throughout the country as the official rate without different exchange rates being used in everyday transactions?” asked ZANU-PF Proportional Representative, Perseviarance Zhou.

Deputy Finance minister Clemence Chiduwa responded, saying: “It is true that most businesses use the implied exchange rate which is different from the auction rate.  We have a special committee which is comprised of different stakeholders like the Consumer Council of Zimbabwe, the ZRP, the business community and others.  From this coming week, we will be having a programme which identifies different exchange rates.”

He added: “From this coming week, we will be monitoring different businesses around the country to identify offenders.  We have a number of contact details where the public can communicate such unscrupulous activities”.

USAID food security arm, FEWS NET, in its  September update confirmed that despite some stability in the official and parallel market exchange rates, some price increases of certain goods and services continue to be recorded.

“Official annual inflation for August dropped to 761 percent from 838 percent in July, with monthly inflation reducing to 8.4 percent from 35.5 percent during the same period, driven mainly by stabilization in the exchange rates,” FEWS NET said.

“However, basic commodity and service prices remain significantly above average and unaffordable to poor households, a situation expected to prevail through at least January.”

This shows that the prices of goods and services are still not reflective of the ZWL firming, proving that the strengthening of the local currency may just be short term.

The continued pricing of goods and services based on unofficial forex rates indicates that official rates are not seen as a true reflection of the ZWL value.

MDC Alliance Vice President and the now recalled Proportional Representative Member of Parliament, Lynnette Karenyi Kore pressed Chiduwa as to whether he knew that most chain stores were using different exchange rates.

“This has been happening for quite some time now.  The Hon. Minister (Chiduwa) informed the House that they will be carrying out this exercise,” she said.

“However, when you leave this House Hon. Minister and go to OK, they have their own prices and if you go to Spar they have their own unique pricing.  How long are you going to allow this to continue?

“This august House has enquired several times on the policy issues surrounding the black market.  We need clarity on such issues.  The question that we have to ask is - how come we have new bank notes at Roadport (Harare International Roadport)?”

Chiduwa admitted that they had delayed addressing this issue but that they had deployed people around the country to monitor the situation.

Norton Member of Parliament Temba Mliswa said the biggest national security threat was the inconsistency of the monetary policy which was behind the different pricing.

The reality is that if the ZWL stabilises, prices of goods and services must fall as this would be a reflection of the local currency gaining value.

But, on the ground, a snap survey by PANA of shops and services providers in Harare's central business district this week showed that prices were still going up.

For example, power utility firm ZESA this weel increased domestic electricity tariffs by 100 percent with the consumption bands per kilowatt hour (kWh) being priced as follows: 1 – 50kWh (ZWL1.11), 51 – 200 kWh (ZWL2.43), 201 – 300kWh (ZWL6.62), and above 300kWh (ZWL10.38).

This comes at a time when the 'Total Consumption Poverty Line' for one person stood at ZWL3,449 in August 2020 while that for an average of five persons per household during the same period stood at ZWL17,244, according to the national statistics agency.

Yet, with all of this happening, Chiduwa responded to Mliswa stating:

“It is true what the Hon. Member said that we are having different rates.  What the Hon. Member submitted in terms of the operations of the parallel market, it is true that we are having different rates, EcoCash, RTGS (real time gross settlement) etcetera but that does not make it legal.  In terms of the USD; I think what is important is also for us to check what is happening in the market.”

He said that a lot of people who are having lots of USD balances were trying to get the ZWL showing that the local currency was on the correct path.

"The most popular currency at the moment as we speak is the RTGS.  You need to go to the market and see what is happening. The Monetary Policy which has been mentioned; we have actually done our Monetary Policy excellently,” Chiduwa said.

He said the money supply growth that was in the market, showed that there was virtually no excess in liquidity that is in the market and because of that, businesses are looking for RTGS balances that are nowhere to be found.

“So, I am not sure, we may not want to say our monetary policy is a miracle monetary policy but we are on the right track.  The monetary policy supporting the fiscal policy and we know we are getting there,” Chiduwa said.

The reply by Chiduwa continues with the age old argument that the Zimbabwe government remains grossly uninformed over the economic, macroeconomic and socioeconomic realities that millions of Zimbabweans face.

Some of these challenges include shrinking wages owing to a devaluing ZWL, unemployment, growing food insecurity, and business closures leading to shrinking productivity.

FIN/ INFOSPLUSGABON/OCT/GABON2020

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