HomeHeadlinesCZI sticks to its guns

CZI sticks to its guns

MELODY CHIKONO/ TATIRA ZWINOIRA
THE Confederation of Zimbabwe Industries (CZI) has reaffirmed its stance on the need for the government to liberalise the foreign currency exchange market and ensure private Nostro accounts are protected.

This comes as the Reserve Bank of Zimbabwe (RBZ) Governor John Mangudya moved in to allay market jitters.

Reserve Bank of Zimbabwe (RBZ) Governor John Mangudya

Last week, the CZI released a paper with various recommendations on how government can stabilise the ailing economy crippled by currency problems.

But the RBZ rebuffed the CZI suggestions, setting a stage for a stalemate between business and government.

The CZI paper had stated that what the country was witnessing with the rapid free-falling Zimbabwean dollar was tantamount to a bank run.

The paper raised serious concerns in the market forcing the central bank to respond, saying the paper was a response to rumours and not facts.

CZI president Kurai Matsheza said the organisation was not backtracking.

CZI president Kurai Matsheza

Matsheza said the initial paper mirrored serious conditions existing in the economy upon which they were engaging the authorities.

“It is our paper and we do not disown it. It is a paper that we wrote and those issues we raised there are still valid,” he said.

“We are engaging but subsequent to that paper we have an engagement with the RBZ and it gave us assurances. We are just giving an update as we cannot assure anything.

“That is not to say we are backtracking. These are the risks that the country is facing but we are engaging. Belief is something else. We just take their word and wait for them to act but it seems this time they are saying what they are going to do,” Matsheza said.

The forex auction, re-established in June 2020, has failed to follow a true Dutch auction system to find the true value of the Zimbabwean dollar, leading to its continued depreciation.

Thus, firms are worried that the RBZ may decide to raid Nostro accounts as it did in 2008 when Zimbabwe’s economy was facing a depression.

However, Mangudya dismissed the claims that it planned to raid the Nostro accounts.

“The Reserve Bank of Zimbabwe wishes to draw the public’s attention to the fact that the contents of the CZI paper are a response to rumours and not based on facts on the ground.

“The contents of the said CZI paper and the impressions depicted therein are unfortunate and uncalled for as they have the potential of destabilising financial markets and economic stability of the country.

“For clarity and avoidance of doubt, the Bank advises the public that:   Government and the Bank are committed to an orderly de-dollarisation process and hence it is false that a mono-currency system is now in place.

“The foreign exchange auction system remains in place and will not be suspended as doing so will cause shortages of goods in the market and abet inflation

“All foreign exchange accounts are safe and the Bank has no reason or appetite to “raid” the accounts as alleged in the CZI paper,” he said in a statement on Friday.

The RBZ is struggling to generate adequate foreign currency from forex retentions to support the auction, resulting in backlogs in allotting the greenback of weeks to months.

THE Confederation of Zimbabwe Industries has called for a cocktail of measures to address the deepening economic crisis particularly around the issue of currency distortions in the economy.

Market watchers, however, believe RBZ will not raid the FCA which has been the bank’s firm position.

“In my view, monetary authorities have learned their lesson over the years to ‘touch not the anointed ones’ and the very fact that we have been having these backlogs from the very beginning of the auction system is testimony that if monetary authorities really wanted to raid, they would have done so already,” economist Clemence Machadu said.

“I think business is just in an anxious period, which has been worsened by the Russian-Ukraine war.

“Since 24 February, we have experienced commodity supply disruptions on the global market, and that raised prices for Zimbabwe’s top imports such as fuel, edible oils, cereals, and other raw materials.

“The end result was that the monthly forex requirement for imports has increased significantly, and this also occurred at a time when the tobacco season was just opening and the auction floors also needed forex to buy tobacco,” he added.

Research and investment analyst Enock Rukarwa said taking FCA funds would collapse investor confidence.

“Taking from the left hand to satisfy the right hand might be inappropriate as it can perpetuate total collapse of investor and business confidence in the economy,” he said.

“Slowing down allocations, whilst covering the backlog might be desirable in the short to medium term anchoring exchange rate losses,” Rukarwa said.

Among the recommendations outlined in the CZI report to address the crisis included suspension of the auction until the backlog was cleared and published as such and independent supervision of the auction along with the RBZ.

The independent supervision team, it said, could include a chartered accountancy Firm and a professional registered auctioneer to allow the currency auction to perform a price discovery role for the efficient allocation of foreign currency, financing foreign currency retention through the budget and putting in place a policy to do away with the priority list and liberalise the market.

The CZI also said, among the benefits of a liberal foreign exchange on economic stability, included allowing for free market price discovery of the exchange rate, which would boost confidence, bring banking sector stability, build reserves from retained foreign currency earnings and curb the need for the central bank to borrow externally to support the auction system.

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