CZI Reaffirms Its Position On The Deteriorating Currency Situation
The Confederation of Zimbabwe Industries (CZI) has reaffirmed its sentiments regarding what it called “the deteriorating currency situation” following condemnation by the Reserve Bank of Zimbabwe (RBZ).
On Friday, 22 April, CZI released its position paper where it urged the RBZ to suspend the foreign currency auction system and fully liberalise the foreign exchange market after the Zimdollar fell to $350 against the US dollar on the parallel market.
In his response to the CZI position paper on Saturday, 23 April, RBZ Governor John Mangudya said CZI was misinformed and the paper should be disregarded.
Mangudya insisted that the foreign currency auction system will remain in place because suspending it would cause shortages of goods on the market and abet inflation.
However, on Sunday, 24 April, CZI president Kurai Matsheza said there is a need to find common ground, otherwise, if the status quo is maintained, some companies could collapse. Said Matsheza:
I think the route of discussion and engagement should be open and we all are really positive that these engagements will take us forward.
I don’t think the authorities will not listen to us. They may have a position, but I am sure that position can be debated and common ground can be found.
I am sure they will listen to what we have highlighted in that paper and they will engage.
We are not saying that they can adopt 100% of the recommendations, some of them can be picked, but I am sure that common ground can be found.
I am sure some will have difficulty continuing operating, it is going to be difficult.
But, look, the situation has been difficult for the Zimbabwean operating environment and I am sure some may actually find it difficult to continue.
Here are the CZI’s recommendations outlined in its position paper released on Friday that seemingly angered Mangudya:
- The auction should be suspended until the backlog is cleared and published as such
- The Auction requires independent supervision along with the RBZ. This can include a Chartered Accountancy Firm and a professional registered auctioneer. This serves to address the rapid trust injection required to stabilize the Z$
- Allow the currency auction to perform a price discovery role for the efficient allocation of foreign currency. This implies true Dutch Auction Principals as originally envisaged are implemented. The highest bids get full allocation within the regulated limits. This will curb abuse of the auction by unscrupulous players in the market, as well as eliminate the premiums and discounts being applied on the official rate. It would further increase flows of foreign currency into the formal system through the participation of willing sellers.
- Auction what is adjudged independently to be available.
- Foreign currency retentions must be financed through the budget.
- Banks must encourage exporters to freely set reserve prices and sell their foreign currency on the auction system.
- Policy must do away with the priority list and liberalise the market.
- High level multi-sectoral meeting that must find a solution for agricultural financing. Banks CEO’s, RBZ, Ministry of Agriculture and Ministry of Finance must be closed in a room in Vic Falls until they find a solution that removes the burden of funding agriculture on printing money.
- Tight control of money supply through holding constant the stock of money circulating in the economy and implementing reserve and broad money targeting.
- Suspension of all quasi-fiscal activities which have an effect of increasing money supply growth and creating market distortions or arbitrage opportunities
