The Chronicle
Oliver Kazunga, Senior Business Reporter
THE macro-economic recovery momentum in Zimbabwe remains sustainable underpinned by the continued implementation of a dual currency policy and fiscal consolidation measures by the Treasury, economic experts have said.
They, however, stressed the need to narrow the exchange rate disparity between the official and parallel market platforms so as to preserve the value of the local dollar.
This week the exchange rate is pegged at US$1:120 at the forex auction with the black market trading at 1:200 and above in some instances.
Of late, there has been renewed interest by some private sector players to ditch local currency and adopt the US dollar as Zimbabwe’s sole currency on the back of resurgent inflationary pressures in the economy, which the Government has dismissed.
Monetary authorities have said that re-dollarising will not address the challenges facing the economy, but would rather trigger past experiences such as rendering locally-manufactured products uncompetitive in the export market as the US-dollar is a stronger currency.
Contributing during the 2022 Confederation of Zimbabwe Industries (CZI) economic symposium and outlook, hosted physically and virtually yesterday, economic experts buttressed the policy direction by the Reserve Bank of Zimbabwe.
The said the dual currency system should prevail as it fosters macro-economic recovery.
An economic analyst, Mr Joseph Mverecha, said the resurgence in inflation reflects the widening parallel market premium compounded by widespread indexation of prices to the black market.
He said the macro-economic policy matrix should seek to achieve sustainable internal and external equilibrium and balance between aggregate demand and aggregate supply necessary to dissipate domestic inflationary pressures.
“In particular, the policy matrix must impact on the economy to occasion simultaneous equilibria in financial markets (both foreign exchange and local money markets),” said Mr Mverecha.
“Authorities must do everything to prevent the collapse of the local currency.
Losing the local currency has most damaging implications on the economy, growth and job creation.”
Through Statutory Instrument 142 of 2019, the Government removed the multi-currency system and re-introduced the Zimbabwe dollar.
As such, economists highlighted that currency volatility and exchange rate pressure has persisted for a long-time warning that if not immediately reversed through appropriate policies, local currency vulnerability would remain elevated with possible currency loss or increasing disuse.
Another economic commentator, Mr Shelton Sibanda said the greatest challenge facing the economy was the growing gap between parallel market and auction rates and this was amplifying informalisation as corporates struggle to secure foreign currency to meet their import needs.
“As the growing forex parallel rate gap hits corporate margins and increases increase inflation, corporates struggle and they migrate to the informal market.
“Zimbabwe dollar inflation to continue in 2022 due to likely quasi-fiscal expenditures.
“However, recovery to be sustained if dual currency regime is maintained.
Businesses and economies, even globally seem to have adapted to the Covid-19 environment,” he said.
Speaking at the same occasion, RBZ Governor Dr John Mangudya said the thrust of the 2022 monetary policy statement was fostering price and financial system stability.
This, he said, was through pursuing a tight monetary path to curb inflationary pressures, sustaining the auction system as a dependable and inclusive source of foreign currency.
“Key takeaways from the new monetary statement are a positive economic outlook on account of increased commodity prices, expected good agricultural season, increase in industrial, mining and agriculture capacity utilisation, continued foreign exchange auction system, fiscal consolidation and firm monetary policy and firm,” said Dr Mangudya.
Article Source: The Chronicle