The Reserve Bank of Zimbabwe (RBZ) has said government suppliers are major contributors to the depreciation of the parallel market exchange rate.
This was said by RBZ governor John Mangudya in the Mid-term Monetary Policy Statement presented on Thursday 11 August 2022.
Mangudya’s remarks come after The Herald’s columnist, Jamwanda, believed to be president Emmerson Mnangagwa’s spokesperson, George Charamba had claimed that the government has been stoking money supply.
A higher supply of money has the potential to further weaken the value of the already depreciating Zimbabwe dollar.
In the Mid-term Monetary Policy Statement (MPS) seen by Pindula News, Mangudya also claimed that the RBZ’s Financial Intelligence Unit (FIU) had discovered significant abuse of loan facilities by borrowers.
This, according to the FIU, was being done through arbitrage, multi-dipping, borrowing on behalf of third parties and diversion of foreign exchange obtained through the foreign exchange auction system to parallel market activities.
Mangudya reported that 15 entities were exposed as abusers of bank credit and they were subsequently penalised. Further reads the MPS:
The investigations further revealed that suppliers of goods and services to Government were also a major contributor to the depreciation of the exchange rate on the parallel market as they were using forward foreign exchange rates in the pricing of their goods and services even after being paid by Government in advance. The continued monitoring, tightening of regulations and imposition of punitive measures against offenders by the FIU is expected to go a long way in reducing speculative behaviour in the economy.
To support an efficient market for foreign exchange, the Bank has moved to eliminate the gap between the auction and the willing-buyer willing-seller exchange rates. It is the Bank’s view that the willing-buyer willing-seller exchange rate is a good indicator of the foreign exchange rate in the economy.
The central bank’s chief said parallel market exchange rates are to a large extent influenced by speculative sentiments and forward pricing behaviour, especially, “by providers of goods and services to the Government.”