Business Lobby In Govt Plea For Clearer De-dollarisation Policy

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Finance Minister Mthuli Ncube

THE Confederation of Industries (CZI) has urged government to be clearer in its de-dollarization agenda amid growing concerns the recent introduction of Statutory Instrument 127 has brought unease within the country’s troubled economy.

CZI was reacting to government’s unpopular policy stance which was imposed without consulting stakeholders.

“The path to de-dollarisation must be clearly defined and will need stakeholders buy-in along the way for confidence.

“A policy position has to be taken for efficiency of the auction market where all foreign currency accruing to government through export surrender, local foreign currency earnings surrender, taxes, duties and any other fees received in foreign currency should be put in one pot as correct supply position of price discovery/determination at auction.

“This would improve efficiency of market for price determination,” said CZI.

The business lobby urged authorities to address deficiencies observed on the auction, which included delay settlement arising from more currency being sold than available.

It also said government needed to take into consideration that confidence was at the centre of all flat currencies, hence the need to avoid policy misperceptions generated by otherwise well-intentioned policy directives.

“It is important that we move to single exchange rate at which the entire economy operates, as the presence of multiple exchange range in economy encourages arbitrage between the different markets and platforms.

“Further engagements are necessary to make this a reality, whether through great efficiency on the auction or through the interbank/bureau markets or some other appropriate markets,” said CZI.

“There is need to be confidence in the auction or a formal foreign currency market before driving towards a mono currency.

“We have always witnessed the unintended consequences of premature push towards mono currency in the past two years,” said CZI.

The group said while it agreed with issues that government, Treasury were trying to resolve, it felt SI 127 in fact did the opposite of what government intended to achieve.

“CZI agrees with the issues that the Ministry of Finance is trying to resolve such as controlling inflation, eradicate the use of black market and informal markets, bring stability/sanity of foreign currency markets and prevent abuse of foreign currency obtained on the auction for profiteering and other opaque activity.

“It is our submission that the SI 127 does exact opposite of the above and indeed will reduce the amount of foreign currency in the official and formal channels, creates USD inflation to achieve a perceived required return by business.

“The market believes that auction is a controlled rate and therefore from the past, we have seen that it looks for another reference point in determining a price,” said CZI.

The lobby groups also believe the SI will reduce foreign currency revenues by government as foreign currency will be driven underground.

“Farmers will be negatively impacted as we expect the parallel market to take over and crash the market. For example, GMB has fixed a price for purchase of grain. This will not reward farmers for their efforts,” CZI said.

The group said business was the most affected in long-term resulting in it taking a defensive posture to the detriment of a volatile economy.

“Trading takes a back seat to balance sheet integrity should the black-market rate start to devalue the ZWL.

“This leads to further inflation as few goods come to market,” said CZI. newzimbabwe

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