Following the government’s announcement that the foreign currency exchange rate will now be determined by the market, a number of people seem to be confused about what is going to happen next or what does it mean?
A lot of people have been speculating that the move will result in a serious spike of the US dollar to RTGS rate while others were predicting that prices will shoot up and a new bout of food shortages will be triggered.
However, Great Dyke News 24 established that on paper, the move sounds like the most pragmatic thing to do given what was now happening on the market which was really causing serious problems for businesses.
Speaking to Great Dyke News 24, Minex Chairman Munyaradzi Hwengwere said the move by RBZ might benefit suppliers who were forced to charge their services using the interbank rate.
“Where you then had a situation whereby there were two markets literally in existence, the so-called alternative black market and a formalised regulated market operating with one rate and the other one operating with some kind of market rate.
“The point is if you are a supplier, let’s say us Minex and we are contracted, the laws say that even if its a thousand dollars it must be paid in equivalent RTGS. Interbank was pretty much fixed at between 16 and maybe 19 since last year, it was not moving.
“It meant for every thousand dollars you get an equivalent of that bank rate. Meanwhile, when you take that money and you want to trade you, trade on a market that operates on 30 or 40 whatever the rate is, so on every thousand dollars you’re losing 50% of that value,” he said.
He added that the move came at a time when every business was already using the black market rate hence nothing will change for them.
“So, suppliers that were operating on the formal market were now in real serious problems. So, what they are now trying to do, is to say we need to make sure that the US dollar on the formal market, if it is traded in local currency that is at market determined rate.
“That the longest shot of it, but of course people are worried that what it will mean in terms of prices, fuel and things like that. We must understand in this country that we cannot subsidize money.
“First generate the money and you can then say, what areas can I subsidize, but you cannot be getting people into the position of law to subsidize you from their money and then someone else enjoys the benefits, it’s called killing the hen that lays the golden egg.
“What l have also noticed is that even the guys on the formal market, what they were now doing is they were now indexing on the parallel market so in certain areas there will be movements but in most other areas there might be very little movement because people had already changed pricing following the market rate,” he said.