Financial Markets To Remain Unstable

According to local financial services firm, IH Securities, Zimbabwe’s financial markets are likely to remain unstable until Nostro Foreign Currency Accounts (FCAs) meet the demand in the real-time gross settlement accounts (RTGS). IH securities went on to say that by separating the accounts, into separate dedicated Nostro FCAs and electronic accounts, the central bank was admitting the two are not at par. Part of the report reads

We believe that volatility in rates will persist until transferrable foreign currency in FCA nostro accounts meets foreign currency demand in FCA RTGS accounts, thus reaching equilibrium. We estimate the real effective exchange rate to be such that the parallel rate should converge to our estimate of 115% (implied rate 1—2,15) should fundamentals come into play…genuine productive sector businesses have significantly slowed down as ability to pass on that level of cost to the consumer becomes strained. This has had an impact on COGS (cost of goods sold) and we expect this to remain a challenge as long as the currency problems remain unresolved.

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