While there was a mere 10 ZWL or so difference between the black market and official rate when the RBZ’s auction system was introduced last year, black market sellers and buyers are now using a rate that is almost double the official rate.
Naturally, this has meant that a lot of SMEs and large corporations have tried their luck on the official rate. Who wouldn’t want to get their foreign currency at practically half the market rate? Unfortunately, this has created a lot of demand while supply has remained depressed. This has led to delays in those who win bids getting their foreign currency. Those delays are in essence shortages.
While most private businesses wouldn’t mind these delays given the giveaway official rate, for government departments and ministries it’s a different story. The auction is practically their only source of much needed foreign currency and for the health sector, the delays have been crippling.
A big issue that we have whether as wholesalers, manufactures and others is that of funding. Funding becomes a central part in a big way in our business. For a lot of us wholesalers, we are constantly finding challenges in terms of access to funds. This includes our auction system. Even when you go to the auction system, payments are being processed after about 10 weeks and 10 weeks is very long time and a business cannot afford to wait that long.Economist, Ms Nyasha Bandason speaking at a recent Health Stakeholders conference
A shortage by a different name
The government’s hand weighs heavily on this auction which is heavily manipulated in such a way as to manage demand. The effect has been that the official rate has lagged significantly behind the unofficial rate.
It seems the government might be struggling to source foreign currency to fund the official market at their heavily subsidised rate. With the black market offering lucrative rates as high as $170 ZWL per 1 USD compared to the paltry $87 official RBZ auction rate it’s not surprising that this is the case. The government will continue to struggle as long as they insist on their lower rate and you can expect the delays in making settlements to become longer.
Over the past two decades, the RBZ has furnished us with one version of the fixed rate or another and in all instances, they insist on rates that are below the market rate. This hasn’t worked and yet here we are with what is now essentially a fixed rate. One has to wonder what they hope to achieve by this?
Not even the 1 billion from the IMF will be enough to fill the large thirst for foreign currency in Zimbabwe. We have seen the government try to dampen the rate hike by offering US$50 at the official rate to individuals. Wouldn’t be it wise to use that money to fund businesses like they have been doing instead? I mean we have a pandemic out there, the least they can do is revitalise the crumbling health sector.
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