'Black market can't determine forex rates'

Government cannot allow itself to be influenced by the black market in determining foreign exchange rates on interbank transactions as the parallel market is run by a few individuals transacting on nominal amounts, Reserve Bank of Zimbabwe Governor Dr John Mangudya has said.

Dr Mangudya said people running the black market in the streets took a position to influence the country's economy for selfish ends  and it would be folly for Government to make decisions based on their activities.

He said this while giving oral evidence before Parliament's joint Portfolio Committee on Public Accounts chaired by Harare East legislator Mr Tendai Biti and that of Budget and Finance chaired by Bikita West MP Mr Elias Musakwa.

Mr Biti had asked why the central bank was not using the prevailing "street rate" in relation to export retention for tobacco farmers.

"I think it will be wrong for the bank to purchase export retention United States dollars from our exporters at the fixed rate at the moment which is 1: 2,5 when the market is 3,5. Can you give us confidence that you will purchase at the street rate. If that is not the case why not just liberalise," said Mr Biti, in a heated exchange with Dr Mangudya.

"If Government are managed by street rates, I think we need to call some equilibrium. I am not sure if you want Government to be led by street rates," quipped Dr Mangudya.

Mr Biti insisted saying: "That is reality."

"You should also be aware that those people in the streets took the position that they are trying to influence this economy. We should never allow people who have taken position on this economy to run it. That will be failure on the part of Parliament or Government of Zimbabwe," said Dr Mangudya.

"These are past effects of parallel exchange rate. If we allow that to happen prices will shoot through the roof. I think we have had enough in this country. I think we need to have discipline in this economy; that is what is missing. We need to have confidence, yes we love the market rate, but who determines that market. Somebody will just say on social media 'today it's five.' If you go and check if there has been any trade to match that level, you will be surprised. Why should a $1 000 transaction move the whole market."

Dr Mangudya said tobacco farmers will have 50 percent retention of the hard currency to be deposited in their nostro accounts.

"In terms of tobacco it is not 30 percent retention, it is 50 percent of the net proceeds. We met the tobacco industry, gold and merchants. We agreed at 50 of the net proceeds to be in their nostro accounts and we want them to open nostro accounts, so that we do not consume from cash. We want people to use bank accounts. The way it will happen is very simple. On the day of the auction, merchants will bring foreign currency into Zimbabwe, tobacco will be sold in RTGS dollars and then they will get their US dollar, they will get their money from nostro money and RTGS dollar," said Dr Mangudya.

Tobacco selling season is expected to start on March 28. Dr Mangudya denied that the central bank was involved in quasi-fiscal activities despite insistence by Mr Biti.