BY VENERANDA LANGA/ FIDELITY MHLANGA
RESERVE Bank of Zimbabwe (RBZ) top officials yesterday insisted that the parallel market rates will soon tumble because the current balance of RTGS dollars in circulation cannot sustain the prevailing exchange rates.
The local currency has been in freefall since its introduction in February and subsequent policy pronouncements by monetary and fiscal authorities have done little to bolster confidence in the RTGS dollar.
With a limited supply of foreign currency on the official interbank market, business has turned to the black market to raise money for critical imports. Central bank governor John Mangudya told Parliament that the value of RTGS dollars circulating in the country was $1, 6 billion.
He was speaking before the Gabbuza Joel Gabuza-led Parliamentary Portfolio Committee on Energy where he disclosed that the problem in the country was to do with lack of confidence resulting in social media floating unsustainable parallel market rates of 8,2% to the US$.
“I do not believe that the value of RTGS balances we hold now can support the parallel market rates being floated of 6,5% resulting in people thinking that there is enough money for RTGS,” Mangudya said.
“The question is who is pushing the exchange rate – who is that person who has those RTGS dollars for them to have the exchange rate going up, and the question is who has the abundance of RTGS dollars to drive the exchange rate?
“We have $1,6 billion in the RTGS dollar account and if you sell $400 million today it takes away all RTGS dollars — so who is that one so rich that they can move the rate?” Mangudya queried.
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RBZ deputy governor, Kupukile Mlambo, also told delegates attending a Confederation of Zimbabwe Industries (CZI) annual general meeting yesterday that the market would soon cool down.
“When I look at RTGS balances the RBZ has vis-a-vis the demand of forex, there is a mismatch. The demand for forex must be backed by RTGS and we do not have enough RTGS to buy that forex. My question is: How much forex do we need in this economy? The black market rate is not sustainable at that rate of US$1:ZWL$8. We can actually buy all the existing RTGS with the current forex we have in this market”.
Mlambo denied speculative reports that the RBZ was buying forex on the black market.
“It is really speculation, but there are people with big pockets who are doing that,” he said.
Mlambo said the gap between the interbank and parallel market would narrow overtime.
The deputy RBZ governor said that the first drawdown of a US$500 million facility put in place to support the interbank market was done on May 21, adding that depending on the market reaction another drawdown could be done this week as efforts to stabilise the interbank market continues.
“We will also put in place a monetary policy framework, initially targeting base money to make sure that it does not grow,” he said
According to central bank data, Zimbabwe’s annual broad money supply increased by 30% to $9,85 billion in January from $7,54 billion last year, despite efforts by government to keep a lid on money supply in order to lower inflationary pressures in the market.
Mangudya also quashed suggestions that the country should dollarise, saying it would be difficult to do so.
“The major challenge in the economy is indiscipline — it is not about RTGS dollar or US$ — we need to exorcise the demon of indiscipline.”
Zvimba North MP Marian Chombo then asked Mangudya to explain issues of confidence saying that it was caused by the fact that people who opened nostro accounts could not withdraw their money when they needed it.
“If the governor is saying to us that he does not even know who is holding the $1,6 billion RTGS dollars in the market which is fuelling the black market, then who is supposed to solve the problems?
We are supposed to look up to you. Go to the streets right now you will see dealers with new $5 bond notes floating but when one goes to the bank, they cannot access money,” Chombo charged.
