Parallel market exchange rates tumble

PARALLEL market exchange rates have tumbled from a peak of US$1:RTGS$9 recently and remain frozen at US$1:RTGS$6 since last week amid indications the rate could drop further after Government secured a US$500 million facility to boost efficiency on the inter-bank forex market.  

Traders are slowly gaining confidence in the interbank system, which has crawled to a competitive US$1:RTGS$5,3 fast closing the gap with speculative parallel market traders.

The trend is expected to continue with the rate expected to self correct and attract more sellers on the inter-bank platform, which is expected to ease price increases and inflation.

As of yesterday the inter-bank rate was trading at US$1: RTGS$5,3, highlighting a small difference from the rates on the formal market.

Illegal forex dealers who spoke to Business Chronicle said the drop in their rates came soon after the Ministry of Finance and Economic Development announced that Government will be supplying the inter-bank market with a US$500 million facility.

"The situation is not looking good at the moment. If it continues to be like this it will be a tough one for us. We are not making good profits and a few people are approaching us for money," said one illegal trader (siphatheleni) who declined to be named.

Bulawayo businesswoman, Ms Thokozile Sikumbe said Government's commitment to scrap the parallel market rates must be supported by everyone so as to stabilise the economy.

"It is a delight that our Government is delivering on its promises to scrap the parallel market, which has been giving business people sleepless nights," she said.

"Hopefully soon we will be all using favourable rates as those stipulated by the inter-bank market."

The high parallel market rates had created a situation that saw retailers increasing prices by over 100 percent, eroding the consumer's buying power.  

Meanwhile, Reserve Bank of Zimbabwe (RBZ) governor, Dr John Mangudya, is on record saying the rates on the parallel market will tumble as they are not sustained by reasonable productive fundamentals.

The governor recently told Parliament that the value of RTGS dollar notes circulating in the country was $1, 6 billion.  He said the problem in the country was to do with lack of confidence resulting in social media floating unsustainable parallel market rates.

"We have $1,6 billion in the RTGS dollar account and if you sell $400 million today it takes away all RTGS dollars — so who is that one so rich that they can move the rate?" Dr Mangudya queried.

"I do not believe that the value of RTGS balances we hold now can support the parallel market rates being floated."