THE Reserve Bank of Zimbabwe (RBZ) governor John Mangudya says US$45 million has been traded over the past three weeks of the interbank forex market, a 25% increase in the average weekly trades compared to last month.
“We have noticed a significant improvement since the launch of the interbank forex platform, with trades amounting to US$45 million over the past three weeks,” Mangudya told NewsDay yesterday.
Last month, the RBZ made the local currency legal tender and created an official foreign currency exchange market to enable companies to easily buy foreign currency from willing sellers due to acute foreign currency shortages in the market.
But fearing major economic shocks, the RBZ put an official rate of RTGS$2,5:US$1 that has since devalued to a current average of RTGS$3,05:US$1.
While the creation of this platform has been lauded, controlled rates differed from the parallel market pegged at the current RTGS$4,20:US$1 and rising, thereby attracting more sellers than the official forex market.
As a result, the parallel market has been outpacing the official forex market by about 52%, throwing doubt to Mangudya’s plan of striking an “equilibrium” between the two rates.
“We are in a transition towards a sustainable equilibrium of the interbank forex market. Rome was not built in a day,” Mangudya said at the launch of the interbank forex market.
Mangudya is hoping that since the tobacco selling season opened last Wednesday, tobacco export proceeds would be injected into the forex market.
However, early indications are this will not be the case as tobacco merchants have suspended purchases and the central bank has reneged on allowing a 50% retention of tobacco export proceeds, thus scaring farmers away.
This is seen in the fact that trade dipped during the first two days of the tobacco buying season compared to the comparative 2018 period.
“The tobacco auction floors only opened on Wednesday last week and it’s premature to say there is a decreased tobacco volume even before the season begins. Negativity won’t take us anywhere as a country,”the RBZ governor said.
According to sources at the Banker’s Association of Zimbabwe, the honest truth is “that there have been more buyers than sellers of foreign currency since the introduction of the inter-bank trading platform”.
Even looking at the official figures themselves, on March 6 in an interview with Bloomberg while visiting the United States, Finance minister Mthuli Ncube said US$7,5 million had been traded in the first week on the interbank forex market.
But on March 11, Mangudya told the Parliamentary Portfolio Committees on Public Accounts Budget, Finance and Economic Development that it was US$12 million.
This confusion raises doubt on the success of the forex market.
There have been reports of frosty relations between Ncube and Mangudya over the direction the country was supposed to take despite the former being the boss.
“There seems to be some restrictions on the interbank market which the Reserve Bank seems to be placing on banks in terms of their ability to freely trade the foreign exchange.
I am not quite sure. I have not seen any regulations, I think, but if you look at the RBZ directive (RBZ Directive to Authorised Dealers, RU 28/2019) it is very clear in paragraph 2.2 willing buyer/seller,” economist Ashok Chakravarti said.
“So, I am not quite sure why banks are not trading as a willing buyer/seller market. What is the problem? I myself I’m not clear. I mean if I want to sell the US dollar at RTGS$3,5 and someone wants to buy at RTGS$3,5 than according to the RBZ directive, the bank must facilitate the transaction.
“Sellers want to trade at rates which are slightly higher than what seems to be offered in the banking system, but it is not for the banks to fix the rate.”