Business Reporter
THE Bankers Association of Zimbabwe (BAZ) warns of the high risk still hovering around ZWG instability if pressing issues have not been addressed.
In a submission filed by the bankers group top the Reserve Bank of Zimbabwe (RBZ) concerns the ZiG is still under the pressure of influences by market conditions, including speculation which may result in more frequent or wider fluctuations in the exchange rate were echoed.
The bankers group are demanding an explanation on the impact of the commodities backing currency for credibility to occur.
“If market conditions remain unfavourable-such as high inflation,low investor confidence, or trade imbalances-the ZIG will depreciate rapidly.This can lead to higher costs for imports and inflationary pressures on goods priced in foreign currency.
“There is a need to ensure sufficient sufficient forex to meet demand-demand can be limited by minimizing creation of local currency,” said BAZ.
The BAZ called for improved market transparency through convergence of official and parallel market exchange rates, improving market transparency and warned that if the exchange rate weakens significantly, it could lead to higher prices for imported goods , driving inflation higher in an economy already struggling with price instability.
“Consumers would face increased costs for essentials like fuel , food , and other imports priced in foreign currency.Foreign investors may view a more flexible exchange rate regime as a positive sign, as it reduces the risk of sudden devaluations and allows them to assess currency risk accurately currency risk more accurately.
“History does not work in our favour as the market holds inhibition around the local currency as long as the confidence levels remain low,” added BAZ.
