|
|
Zimbabwe: Dollar Slumps to Historic Low
 |
|
|||||||||
|
||||||||||
Financial Gazette (Harare)
8 May 2008
Posted to the web 9 May 2008
Dumisani Ndlela
Harare
ZIMBABWE'S beleaguered currency slumped to a historic low on the official market as rates began moving after the central bank let up on controls to encourage the inflow of hard currency into the inter-bank market.
The United States dollar, which had been fixed at $30 000, was fetching $160 million on Friday and dealers said they expected a gradual decline in the value of the domestic currency on intensifying demand. The Zimbabwean dollar was expected to breach a low of $200 million to the greenback this week.
Other currencies moved around the benchmark greenback rate to the Zimbabwe dollar, and in line with international developments, which saw the US dollar rising to a five-week high against the Euro.
"We made representations to the central bank to start trading at $160 million to the greenback and they agreed," a dealer with a commercial bank said.
The rate was slightly higher than the parallel market rate on Friday, suggesting the central bank was determined to see rates move to levels that would wipe out the parallel market, blamed for the country's unrelenting economic woes.
The Reserve Bank of Zimbabwe (RBZ) governor Gideon Gono announced the move to relax the exchange rate and allow it to trade on the open market under a willing buyer/willing seller arrangement he said was meant to cushion exporters and win the confidence of a restive business sector to take the economy back on a recovery path.
Under this new policy, exporters and importers can now freely trade foreign exchange in the de-controlled inter-bank foreign exchange market, but they will use a pre-determined list of key sectors for disposal of the foreign cash.
Top on the priority list is the grain, food producers, fertilizer, seeds, animal drugs, good-related machinery and seeds category, commanding 35 percent of allocations, followed by fuel, electricity (20 percent) and the non-food equipment and other industrial machinery (20 percent).
Other priority payments include public and commercial transport, vehicle kits, tyres, batteries, wind-shields and other essentials (20 percent); school fees, business travel, professional fees, IT licences and dividends (10 percent); and medical drugs and equipment (10 percent).
Authorised dealers are expected to match sellers and buyers of foreign currency under this arrangement.
Authorised dealers, who include banks, money transfer agencies and the central bank-owned Homelink, can now buy and sell foreign exchange at market-determined exchange rates under the same policy.
They will be compelled to display the average buying and selling prices for foreign currency for willing sellers and willing buyers.
Non-governmental organisations, embassies, international organisations and Zimbabweans in the Diaspora as well as other foreign currency holders would also be able to dispose their foreign currency at the inter-bank rates, likely to replace the fixed exchange rate of $30 000 to the US dollar.
Bankers were already canvassing for foreign currency holders to dispose their foreign cash through their respective dealers, as competition for hard currency emerged as a result of the latest measures.
The Bankers Association of Zimbabwe (BAZ) said it welcomed Gono's measures, particularly those related to the selling and buying of foreign currency through authorised dealers and competitive exchange rates.
"These measures will have a positive impact on the management of foreign exchange inflows ...we encourage the public, SMEs (small scale enterprises), corporates and Zimbabweans in the disspora to conduct all their foreign exchange transactions through authorised dealers," BAZ said.
In its weekly commentary, Kingdom Stockbrokers (KSB) said the effectiveness of the inter-bank market in harnessing foreign currency that lies outside official channels so that everyone, including government, can easily access it, depends on the transparent implementation of the system based on market forces of supply and demand.
"This is very important to build the much needed trust and confidence since the major initial source of the foreign currency is the illegal parallel market. This requires authorised dealers to limit their participation in the market to their traditional intermediary roles of matching deficit units with surplus ones and taking their stipulated commissions of +/- 0.25 percent for their own books.
|
"Surplus units are the exporters and holders of free funds while the deficit units are the importers who need foreign currency to import essential raw materials. An important worry by participants in the foreign exchange market is the possibility of private players being crowded out by the Central Bank given that it will also be competing for the scarce foreign currency resources with everybody else.
An ideal situation would have been for the Central Bank to limit itself to its regulatory role.
Be that as it may, the quasi-fiscal role of the Central Bank in supporting the productive sectors of the economy, hence the need for it to also raise foreign currency from the market is, however, noted and appreciated," said KSB.
| |||||||||||||||||||||||||||||
| |||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||
| Copyright © 2008 Financial Gazette. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections -- or for permission to republish or make other authorized use of this material, click here. | |||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||
| Make allAfrica.com your home page | RSS Feed | |||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||
| Top | Site Guide | Who We Are | Advertising | Search | Subscribe | |||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||
| Questions or Comments? Contact us. Read our Privacy Statement. | |||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||
