'Address interbank market glitches'

Published: 28 April 2019
The Government should address glitches in the interbank market system to help stabilise prices of basic commodities, manufacturers and retailers have said.

This follows Vice President Dr Constantino Chiwenga's warning to "financial terrorists" against arbitrarily increasing prices.

A new wave of price hikes rocked the country since the beginning of the month as the RTGs$ tumbled against the US$ on the parallel market. This saw the cost of a standard loaf of bread rising to RTGs$3,50.

Addressing captains of industry and commerce during the 13th Zimbabwe International Business Conference, Dr Chiwenga said the latest wave of price hikes were unjustified.

The Minister of Finance, Professor Mthuli Ncube, weighed in on the Vice President's sentiments saying it was wrong for businesses to determine prices using parallel money market rates. However, the Confederation of Zimbabwe Retailers president, Mr Denford Mutashu, said it was not correct to say retailers were sabotaging the economy.

He called on Government to address discrepancies on the interbank market.

"As retailers, we want to see the economy working just like everyone else and it's not true that we are sabotaging," he said.

"The problem is that manufacturers are no longer getting the same support they were getting from Government in terms of access to foreign currency. The interbank market was supposed to be the answer to that problem."

Mr Mutashu said the interbank market had failed to work effectively as forex traders were not forthcoming.

"The interbank market has not worked as we had hoped when it was put in place. As such, businesses end up going to the parallel market where rates are always changing thereby affecting prices."

Mr Mutashu said the other problem was the little number of players in the manufacturing sector. He said monopolies in the manufacturing sector means those participating can hike prices at will.

"The other thing is that the manufacturers are taking their products to the informal market where they get forex thereby leaving formal retailers in the fix," he said.

"The recent changes in grain producer prices have not helped the situation as they have sent shock waves in the grain millers' value chain."

The Governor of the Reserve Bank of Zimbabwe, Dr John Mangudya, recently devalued the RTGS$ and set up an interbank market in a bid to curb runaway parallel market forex rates.

Experts, however, said businesses have not been able to access forex through this channel and this has  put pressure on the parallel market. Confederation of Zimbabwe Industries president, Mr Sifelani Jabangwe concurred saying the interbank market needed a review.

"What we are seeing is that there is low liquidity on that market and the sellers are not coming to the market," he said.

"Having inquired from them to say what are the issues – what is it that they are concerned with – the issues that have come up are issues to do with the rate which they are saying what is currently prevailing on the market is lower than what they would expect to get.

"Then we have the issue of 20 percent liquidation which the exporters or those that should be selling are saying is happening at a rate which they are not happy with and this is resulting in them having sub-economic returns. Then the other challenge that they cited is that the 30-day retention may need to be extended a little bit particularly for the 80 percent that they will be returning because they are saying 30 days is too short a period for them, particularly the large exporters to be able to make plans."

Speaking to captains of industry, Dr Chiwenga expressed shock that parallel market deals were continuing to overshadow the economy despite prudent policies being put in place by Government.

He said this was the case because there were people feeding the parallel market.

"I want to give a stern warning to those practicing financial terrorism in the country," he said.

"We will react accordingly as Government and nobody should claim that they were not warned. We'll take strict measures."

The Vice President said it was disappointing that some businesses were financing the black market at a time when the Government was making efforts to create a sustainable economic environment.

"The market-based framework for the determination of the exchange rate is expected to facilitate financial sector stability, contain inflationary pressures and build public confidence," he said.
- sundaymail
Tags: interbank,


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