HomeBusiness DigestForex shortages persist

Forex shortages persist

Shakeman Mugari

CRIPPLING foreign currency shortages continue countrywide despite the introduction of the controlled auction system by the Reserve Bank of Zimbabwe (RBZ).

“Verdana, Arial, Helvetica, sans-serif”>The Zimbabwe dollar has continued to lose ground against the world’s major currencies that are now finding their way onto the black market.

The South African rand and the American dollar are still traded profitably at black-market spots dotted around Harare and Bulawayo.

The RBZ has failed to satisfy the increasing demand for foreign currency at the weekly auctions held on Mondays and Thursdays.

Companies that fail to acquire foreign currency on the auctions have resorted to the parallel market where the greenback has firmed against the Zimbabwe dollar.

This has led to the widening gap between the auction and parallel market rate.

The US dollar is trading at an average of US$1:$5 300 on the auction. This is however in stark contrast to the parallel market where it is fetching up to $6 500.

The rand continues to be one of the most liquid currencies on the small-scale black market – Harare’s Road Port and Africa Unity Square where ladies from the Apostolic Faith church (Mapositori) continue dealing in foreign currency daily.

Analysts say the resurgence of a parallel market has been caused by the stringent and “discriminatory” foreign currency allocation system on the auction market.

They say the central bank’s emphasis on the priority allocation has forced most companies to source hard currency from the parallel market.

The Reserve Bank has prioritised the production and essential service sector, which continue to mop up the bulk of the forex on the auctions.

“The scarcity of forex has continued because Zimbabwe is not exporting as much as it used to,” said an economist with a local commercial bank. “Most companies and travellers are still getting their foreign currency from the parallel market. The reason is that it is a nightmare trying to get forex on the auctions.”

An analyst warned that the gap between the official and the parallel market rate would continue to widen because Zimbabwe is not producing enough exports to earn the foreign currency.

He said the country would continue to have a deficit until there is a boost in export earnings that have been on a slide for the past four years.

Economist John Robertson said the parallel market was being fuelled by foreign currency dealers frustrated by the stagnant rates on the auctions.

“The black market continues to flourish because there are some traders who are fed up with the auction rate that has not moved since April. They are now looking for an alternative market,” said Robertson. “There continues to be a forex shortage because we are not exporting much. The auction does not stop scarcity. It only links buyers and sellers – that’s it.”

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