Respect Gwenzi Financial ANALYST
For a second consecutive week, the Zimbabwean dollar lost ground to the US dollar on the RBZ’s forex platform. The week’s depreciation has however decelerated from last week’s 3,68% down to 2,25%, resulting in a weaker exchange rate of ZW$115,4223 per US$.
Funds allotted were up 25,63%, rising from an SME & main auction total of US$30,86 million distributed a week ago up to the US$38,78 million allotted in the latest auction.
The issue of allotment timelines resurfaced this week through the Confederation of Zimbabwe Retailers and its drive to get weekly allotments settled within two days as opposed to the two-week (or longer) timelines bidders have reportedly faced. Timely settlement tames a market tendency of resorting to a more liquid parallel market — one priced inconsistently and at the discretion of the forex holder.
As a self-insulation measure, particularly for retailers operating in an inflationary environment, slow or delayed forex settlement raises a need to price goods and services at prices unfair to consumers in order to minimise expected value loss that could be brought about by inflation.
However, it’s yet to be seen if the formal market’s exchange rate setter has the capacity, will and discipline to improve on 2020-2021 forex disbursement timelines in a consistent and sustainable manner.
With the recently published resolutions by the central bank and leading industry players, export incentives and more considerate statutory instrument adherence appear to be the way forward as ways of:
Stabilising forex supplies needed for weekly auctions, and
Easing eroding value perceptions of the ZW$ relative to the US$ (as seen through exchange rate manipulation).
Recent economic developments in Zimbabwe are pointing towards month-on-month inflation growth fuelled by:
Food and beverage industry cost increases;
Transport sector price adjustments on account of recent fuel supply concerns as well as city council and Zinara toll revisions; and
Public utility rate adjustments between December 2021– January 2022.
The more the ZW$ depreciates against the US$ in both formal and parallel markets, the faster confidence in the ZW$ erodes — motivating inflationary forward-pricing by retailers and other economic sectors.
The hunt for US$ and preference for it as a store of value will go on to increase, with Foreign Currency Account balances remaining swelled due to US$ lending reluctance.
Economic uncertainty is likely to continue in 2022, encouraging Zimbabwe Stock Exchange trades and investments by a market desperately chasing value and in search of a safe bet against expected inflation.
Gwenzi is a financial analyst and MD of Equity Axis, a financial media firm offering business intelligence, economic and equity research. — email@example.com