The Country Still Lacks a Transparent Formal Foreign Exchange Market: CZI

“Confidence in the local currency remains low and a strong currency preference  for foreign currency persists
The psychological scars of the hyperinflationary period still run deep within the psyche  of economic agents in Zimbabwe.
We see an almost religious reverence for foreign  exchange with economic agents going to extraordinary lengths to procure foreign  exchange in order to preserve value.
Within such a context running fiscal and monetary policy is nightmarishly difficult. We  have had to pay for a massive harvest to farmers in a currency that they do not want. It is little wonder that these payments have led to depreciation of the currency on the  open market.
Indeed we need to commend the fiscal authorities as they have done the absolute best to manage this process in very difficult circumstances. It will be tragic beyond words  to let all this hard work go to waste because of an inappropriate policy response to  what was bound to happen in the circumstances that we found ourselves in.
The country still lacks a transparent formal foreign exchange market that responds smoothly to supply and demand for foreign exchange. This has  resulted in an increasing parallel market premium that is becoming a growing problem.
After starting well, the Dutch foreign auction in Zimbabwe has now been distorted by  a lagging supply stretching over 15 weeks in some instances. This has added to the  pressure on foreign exchange that was already very high because of the large  payments to farmers and contractors.
These factors are the main drivers of the  widening parallel market premium. With this widening premium arbitrage, distortions  and inflation pressures are entrenching.
This has also increased preference for the  USD among economic agents making the ZWL$ vulnerable and the inflation environment precarious.”
Robert Tapfumaneyi