Many traders in Zimbabwe’s hardware shops, stockfeed outlets, pharmacies, grocery and motor vehicle spares shops continue to flout central bank regulations on the pegging of the foreign exchange market and are charging way beyond the official rate.
Xinhua has established that although many outlets display the official exchange rates, prices are not tagged on their goods with customers only getting to know them at the points of sale, with the U.S. dollar value equivalent way beyond the prevailing official exchange rate.
As of Saturday, many outlets were charging their goods at between 110 Zimbabwe dollars (ZWL) and 130 ZWL to the U.S. dollar, yet the current exchange rate pegged at Tuesday’s foreign currency auction is 83.88 ZWL to the U.S. dollar.
Tedius Gombe, a motor spares dealer said it would be impossible for him to replenish his stocks if he charged at the official rate.
“Our currency remains volatile and if I am tempted to sell at the official rate, I will not be able to stock up again even though the U.S. dollar value remains the same. If you pay via mobile money platforms or through the bank, I will still need to buy the foreign currency on the black market to replenish my stocks on the black market. The Reserve Bank (of Zimbabwe)’s auction system does not cover us since we do not have the financial muscle to compete with the big traders,” he told Xinhua on Friday.
However, secretary for finance in the government George Guvamatanga said the auction exchange rate represented the proper market trends contrary to the contrived perception that the parallel market signified the real exchange rate, the state-run Herald newspaper reported Friday.
Guvamatanga said this was despite the fact that the majority of key producers and importers were getting forex from the weekly auction.
Speaking during the 2021 monetary policy review webinar earlier in the week, he said that the government was not happy with the extent of market indiscipline that had seen wanton and unjustified prices increase.
Guvamatanga said people should move away from the concept that the open market trend was the real exchange rate because such assumption was not supported by economic or empirical evidence.
He admitted the parallel market rate should be higher than the official rate, but disagreed with the huge margins that were being used.
Guvamatanga said price dynamics over the past couple of months signified market indiscipline, which led to potential market failure.
He warned that the government would not hesitate to intervene in the market to prevent failure, though this was not the desired course of action.
“We are very much worried about the extent of the current levels of indiscipline and the government strongly supports action by the Reserve Bank to (mete out) necessary punishment for those who are abusing the auction system,” he said.
He said the Government was highly concerned by the level of price increases noted over the past two months, which the authorities thought were not justified.
He also accused major retailers of failing to comply with standing forex rules, saying that they had hiked prices by 30 to 60 percent on a number of key products, and thereafter applied the auction-rate to translate the U.S. dollar prices to local currency. Enditem