Expert disputes unregulated exchange rate market calls as Zim$ depreciates to US$1: ZWL1 888

Business Reporter

THE ZWL depreciated further on the Reserve Bank of Zimbabwe (RBZ) foreign exchange auction Tuesday as an economic expert has disputed the widespread calls to free the exchange rate market system.

A trading update released at the close of business Tuesday shows that the exchange rate depreciated to US$1: ZWL 1 888 down from US$1:ZWL1 404 recorded last week signifying a 34% decrease inside just one week.

The latest development comes after another 14% fall recorded as of last week.

In comparison, the parallel market rates have reportedly reached a high US$1:ZWL3 500 as speculation remains rife in what has seen the businesses adopting forward pricing which has further complicated the situation.

A joint report by the Competition and Tariff Commission and National Competitiveness Commission has emphasised the need for market forces to determine the exchange rate and prices, suggesting that this approach is unlikely to lead to price increases since manufacturers’ costs are already linked to the parallel market.

However, while calls to leave the market forces to determine the exchange rate have been echoed in some sections of the society, economist Persistence Gwanyanya believes that there is still need for the RBZ to maintain a watchful eye.

“As l have always argued, the RBZ should continue to maintain a watchful eye on the operation of the market because when left on their own, the market players can spin it out of control,

“Faced with market failure, leaving exchange rate determination completely to the market could be disastrous. For an economy where wealth is concentrated in the hands of a few, there may need to aid the markets,” he said.

Meanwhile, out of the allotted funds the Main Auction received a total US$13,2 million with the SME Auction receiving US$958 000.

Raw materials, machinery and equipment received the bulk of the allotted funds in line with supporting productivity.