A group calling itself the Zimbollar Research Institute, which has been tracking the black-market rate of the local currency against the United States dollar as well as economic policies announced by the government, says the new measures announced yesterday to strengthen the Zimbabwe dollar, which was reintroduced yesterday as the sole legal tender in the country, are very solid from all angles.
The re-introduction of the dollar has been severely criticised by those who feel that the fundamentals are not yet right but Finance Minister Mthuli Ncube said that the government had to intervene as the economy was self-dollarising.
“In all our analysis we thrive to be fair and objective,” Zimbollar said. “The measures introduced yesterday look very solid from all angles. The key word is IMPLEMENTATION!”
It added: “The fact that we face criticism from both sides of our characteristically divided society is PROOF that we are objective. We will stick to OBJECTIVITY!”
In its analysis of the measures announced by the Reserve Bank of Zimbabwe to cushion the local currency, Zimbollar said the move to mop out Z$1.2 billion by the end of this week will mop excess liquidity and in the process reduce pressure on the exchange rate since the payments will be done at 1:1 from the RBZ.
“Key issue will be availability of the forex to meet this quantum,” it said.
The central bank said it had put in place lines of credit amounting to US$330 million for the importation of fuel, cooking oil and wheat.
It also increased interest on overnight rates from 15 to 50 percent. Zimbollar said the move is meant to divert pressure that was coming on the exchange rate from borrowing customers.
“By increasing the cost of borrowing, the RBZ has limited credit creation and hence money supply. This is essential for exchange rate stability,” it said.
It said the removal of administrative limits on banks and bureau de changes will allow them to correctly price foreign currency on their Buy and Sell Trades.
“As a result they are technically empowered to match the Alt Market (black market). This move should deal a heavy blow to Alt Mkt activities!” Zimbollar said.
It said a 90 day vesting period disqualifies holders of shares from disposing the same within the 90 day period.
“Effectively investors will not be able to speculate with easy. Importantly the move will address the challenge around the OMIR arbitrage!
“The 50% surrender requirement will be a huge disincentive to exporters. However if the Interbank market rate will be competitive enough to match rates elsewhere in the market, then there won’t be any loss in value to exporters on conversion to the local currency.”
Former Economic Planning Minister in the inclusive government Tapiwa Mashakada who lost the contest for treasurer to David Coltart at the Movement for Democratic Change congress in Gweru continued to sing from the same hymn with his colleagues.
He said the market will have no confidence in the Zimbabwe dollar. Retailers will withdraw goods from the shelves and cause artificial shortages and this will drive prices upwards.
The parallel market will come back with a vengeance since government has introduced domestic currency without a floating or managed exchange rate for it.
The market will reject the Zimbabwe dollar and go back to the US dollar on its own.
Mashakada said the government has no capacity to enforce the use of the Zimbabwe dollar on the ground and will resort to the printing press and increase money supply growth as it seeks to increase civil servants’ wages and meet its day to day obligations.
This, he says, will feed into hyperinflation. Since the government is the sole printer of the sovereign currency it means that through underhand dealings the Reserve Bank may continue to drive the black market by buying forex to meet import requirements.
“We will see new notes on the streets,” he said. “Zimbabwe will again have a useless and debauched currency which only serves sentimental reasons.”
Mashakada is now MDC secretary for policy and research.
The government has running a surplus despite increasing salaries for civil servants and has been investing heavily in infrastructure, especially roads.
According to Marketwatch, the Zimbabwe dollar strengthened marginally against the US dollar on the interbank market. It was down to 6.31 from 6.32 yesterday.
It, however, fell marginally on the black-market to 13 against the RTGS dollar from 12.9 yesterday, 11.18 to the OMIR from 11.08 yesterday and 10.4 to the bond note against 10.32 yesterday.