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BusinessOpinions

ANALYSIS OF INFLATION AND EXCHANGE RATE DEVELOPMENTS AND THE IMPACT ON COMPETITIVENESS

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By National Competitiveness Commission

 

Inflation and Exchange Rate Analysis 

 

A relatively stable exchange rate coupled with falling levels of inflation awards the country a competitive advantage as this reinforces macroeconomic stability.

 

 

Zimbabwe’s macroeconomic environment has deteriorated for the period under review, threatening the country’s competitiveness compared to our major trading partners.

 

 

 

Notwithstanding a plethora of other measures by the fiscal and monetary authorities to suppress money supply growth, indexation of prices in foreign currency continuously exerts upward pressure on prices.

 

 

In this regard, Zimbabwean inflation is merely a symptom of local currency depreciation.

 

 

Exchange Rate South Africa Botswana Zambia Zimbabwe

 

 

 

To this end, the Commission is of the view that more effort should be continuously applied towards the stabilization of the local currency and building public confidence to improve competitiveness and continued use of dual currency in the short term.

 

 

Support of the local currency requires enhanced production to substitute imports and improve the country’s immunity to external shocks, failure of which global shocks will continuously destabilize the country’s macroeconomic environment and hence negatively impact competitiveness.

 

 

Government is also urged to ensure convergence of the auction, and WBWS exchange rate to close the gap between the official and parallel market rates if free funds are to be unlocked from individuals and corporates.

 

 

 

Otherwise, the ZWL will continue being overvalued on the official exchange rate thereby discouraging trading in the formal market.

 

 

Recent developments in the monetary sector, where gold coins are introduced as an investment vehicle for storing value is a positive development, resulting in stabilization of rates in the parallel market.

 

 

However, the Government has a mammoth task to in still confidence and get buy-in from the public since Zimbabweans have no history in this type of investment, given that the country is still nursing wounds from the 2009 hyperinflation, where investments and deposits lost value overnight.

 

 

 

This requires responsible Government entities to conduct vigorous stakeholders’ awareness campaigns.

 

 

 

To buttress this, there is need for continued stakeholders dialogue and consultation to discuss macroeconomic issues and challenges faced by business and proffer recommendations to enhance national productivity and competitiveness.

 

 

 

Government to prioritise the improvement of regulatory environment as this has been impeding business and national competitiveness as well as discouraging investment.

 

 

This should be imbedded in the long-term national development plan and the National Budget

 

Robert Tapfumaneyi