By Golden Sibanda
The Reserve Bank of Zimbabwe (RBZ) says it remains confident that activity on the interbank foreign currency market will pick up considerably on the back of measures the bank has taken to increase foreign currency inflows.
Activity on the interbank has remained largely subdued since the platform was launched in February this year with importers complaining that they are struggling to get the volumes they require for key raw materials imports.
Importers now have to buy their foreign currency re on the interbank at the prevailing exchange rate, while the central bank continues to make allocations for critical imports that include fuel, medicines, drugs and power.
Exporters, who hold the bulk of the hard currency importers need for key inputs, have continued to tightly hold on to their funds, ostensibly because the prevailing interbank rate has remained on the lower side of their expectations.
The interbank market rate, which opened at 1 to 2,5 between the green back and the local RTGS dollar, has since dropped to around 1 to 3,18 with volumes traded steadily growing but not fast enough to match market demand.
But RBZ Governor Dr John Mangudya said the apex bank had taken measures to improve liquidity on the interbank, including resolving concerns of tobacco farmers to encourage them to sell their crop to shore up forex inflows.
In the first few days of the 2019 marketing season farmers threatened to withhold their tobacco citing low prices that were being offered by merchants, compared to prices that prevailed in the same period prior year.
The apex bank had also started drawing down on lines of credit secured from foreign banks, which would further enhance funds that can be traded on the interbank market.
“Activity on the interbank will improve going forward as the tobacco marketing season progresses and farmers deliver more of the crop since we have moved to address their concerns.
“The bank will also start drawing down on facilities that we have secured from foreign lenders and this should increase the inflows of foreign currency to the market for trading and supporting importers’ needs,” Dr Mangudya said.
The central bank Governor announced the introduction of an interbank market for foreign currency when he presented the 2019 Monetary Policy Statement on 20 February, 2019. Monetary authorities mulled the interbank system to ensure efficient distribution of resources through market forces of demand and supply, which it felt would fairly reward the holders of hard currency in line with market trends.
In the 2019 monetary policy statement, Dr Mangudya also announced the new policy position that saw the bank abandoning the 1 to 1 exchange rate policy between the US dollar and local forms of payment for a market based exchange rate system.
Captains of industry are on record calling on authorities to make fresh interventions in the forex inter-bank market to ensure improved access to foreign currency for importation of critical raw materials for the manufacturing industry.
Confederation of Zimbabwe Industries (CZI) president Sifelani Jabangwe said there was need to investigate what factors are stopping sellers to come on board apart from pricing issues.
Zimbabwe National Chamber of Commerce (ZNCC) vice president for Mashonaland Archie Dongo also said there was need to continue reviewing how the interbank market system operated to make sure that different sectors of the economy realised optimum benefit from its existence. Sunday Mail.