Zimbabwean business urges Central Bank to liberalise exchange control

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The Confederation of Zimbabwe Industries insists exchange controls in the country “need to be liberalised as the gap between the official rate and the parallel market continues to widen creating undesirable arbitrage opportunities.”

Depending on the economic agent one is dealing with, parallel market exchange rates can be anything between $15 to $55 above the official exchange rate of $85 to US$1.

In its latest Quarterly Business and Economic Intelligence Report, CZI says delays to settle successful bids from the foreign currency auction system is damaging.

“The currency auction settlement backlog threatens both the efficacy of the auction as an efficient price discovery mechanism and creates a legacy risk as the settlement arrears accumulate, should the markets fail to converge.”

The foreign currency auction system turned one-year-old on Tuesday last week and has reportedly allotted US$1.5 billion to importers.

Latest figures from the central bank showed the bulk of the funds went towards procurement of key raw materials, machinery and equipment, pharmaceuticals, retail and distribution and consumables.

Finance and Economic Development Minister Mthuli Ncube seemed to also suggest that the auction system still needed to be worked on.

“We want to support and fine-tune the auction so that it can be more efficient,” Mthuli told our sister publication The Herald on Monday this week.

CZI also spoke of the country’s debts, in particular the legacy debts to foreign entities, which it said need to be resolved.

The Reserve Bank of Zimbabwe assumed responsibility of debts that local entities had failed to remit to foreign suppliers and shareholders due to foreign currency shortages, but is yet to pay them off.

Legacy debt issues need to be resolved, CZI says.

The central bank is reportedly putting in place a blocked funds Bill to cover legal aspects of legacy debts before clearing them.

“A committee has been put in place and is going to meet and map the way forward,” Dr Mangudya is reported to have said.

CZI also raised concern with regard state enterprises reforms which it said “are long overdue.”

The doing business environment needs continuous improvement to ensure competitiveness, CZI added.

Plans to reform state enterprises and parastatals (SEPs) continue to face strong resistance and frustration from line ministries that own them, according to the Ministry of Finance and Economic Development.

“Tendencies to protect vested interests of line Ministries, SEPs Boards and management are working to reverse some approved reforms,” reads part of the Economic and Fiscal Report for Year 2020 released by Treasury mid-May.