THE Confederation of Zimbabwe Industries (CZI) has called for the devaluation of the Zimbabwe dollar, saying the current exchange rate had become “unrealistic”.
“There is an urgent need to review the current exchange rate,&
#8221; CZI president, Patison Sithole said during a press briefing on Tuesday.
Sithole said there was an urgent need for a holistic approach to Zimbabwe’s economic crisis to curtail price distortions and improve productivity and export growth.
Sithole criticised the volume-based exchange rate system introduced in January this year by the Reserve Bank, saying the system had become unsustainable, resulting in the over-valuation of the local currency.
He said the impact of an overvalued currency had been disastrous to small scale companies.
The central bank in January introduced a volume-based exchange rate to control the movement of the exchange rate, which had drastically moved in line with inflation under market-controlled exchange rate regime that had been briefly introduced following an auction system that had been widely criticised as ineffective by market players.
Sithole, who declined to give his own views of the ideal exchange rate under prevailing circumstances, said: “What we should ask ourselves is: what is the best exchange rate regime under this environment. (We want) a whole package and not just the right exchange rate at a particular time.”
Sithole joined a chorus of calls for a devaluation of the Zimbabwe dollar from tobacco growers, gold miners and exporting companies who have said the current exchange rate system was eroding viability and leaving them in the lurch.
The current exchange rate, critics said, has not taken into account Zimbabwe’s rising inflation, which has ballooned significantly when inflation levels in major country trading partners has been significantly low.
Annual inflation is currently at 1 193,5 % year on year for May, the highest in the world.
The fixing of the exchange rate on the official market has pushed trade in foreign currency to a thriving parallel market, where the US dollar is fetching over $320 000.
The rate on the official market is US$1: $101 195.
Many companies have resorted to the parallel market for foreign currency because of unavailability on the official market.
This has resulted in many companies using parallel market rates in determining prices.
CZI will hold its annual congress between 26 and 28 July in Bulawayo.
Key issues expected to take centre stage at the congress include the need for investor friendly monetary and fiscal policies, issues of toll manufacturing to increase industrial productivity, value addition and import substitution.