Some businesses are reportedly still using exchange rates of between ZWL$8 000 and ZWL$11 000 per US$1 in anticipation that the strengthening of the local currency will not last longer.
They argue that selling at the new exchange rates will see them record huge exchange rate losses given they stocked when rates were too higher.Over the past few weeks, both the official exchange rate and street rates have been coming down after the Government introduced the wholesale foreign currency exchange auction system.
The system allows banks to access foreign exchange at market-determined exchange rates for onward transmission to their customers.As a result, the official exchange rate has firmed to ZWL$4 999, from a peak weakness of ZWL$6 926 per US$1.
However, market players have little confidence that the current stability will last for longer and anticipate that the rate will soon run again due to increased salaries for civil servants and payment of suppliers.Secretary for Finance and Economic Development, George Guvamatanga, on Thursday, told Business Weekly that the Government is still meeting its obligations and “paying contractors and suppliers”.
He dismissed claims that there is a liquidity crunch in the market as the local currency is readily available at banks, RBZ, and from Government.Guvamatanga asserted that most companies are struggling to price their products because they have never experienced a firming currency. He said:
There are lots of Zimbabwe dollars because as Government, we are still paying our contractors, and we are still paying our suppliers, it’s only that they are looking at the wrong place (for the Zim dollar)…
Most executives, finance directors and those in treasury departments, have no experience of a strengthening currency and do not know what to do.They are used to one-way forward pricing and this is reflected in the market right now.Well-trained officers would have reached their stop-loss positions.
Guvamatanga also denied reports that only the Government was officially selling foreign currency at the official exchange rates. He said:
The market sold to their banks more than U$110 million while Government has sold US$67 million.Voluntary liquidations are almost 100 percent of what we have supplied. So the market is already clearing on its own.All this money has been traded around the official exchange rate. It shows the new auction has the support of exporters because this is the first time we have seen this level of liquidation.
At the Wholesale Foreign Exchange Auction conducted on Tuesday, 11 July, US$5 640 000.00 was allotted from a total of US$20 000 000.00 that was on offer.
Source Pindula News
