News / Local
US$ shortages on official market crippling ZiG acceptability
12 Sep 2024 at 08:07hrs | Views
The Confederation of Zimbabwe Industries (CZI) warns that the ongoing US$ shortages on the official market could further undermine the ZiG currency, amid increasing calls for comprehensive reforms to address the local currency's challenges.
This concern arises as parallel market exchange rates have surged to over US$1
22. The market's reaction to these developments has intensified inflationary pressures, jeopardizing the local currency's stability unless prompt and effective measures are taken.
Despite assurances from authorities that the situation will improve, CZI highlights that the persistent foreign currency shortages on the official market could undermine the ZiG's acceptability. According to CZI, companies are struggling to secure foreign exchange through official channels, which threatens the widespread use of the ZiG. On July 25, 2024, the Reserve Bank of Zimbabwe (RBZ) reported increased demand for foreign currency at banks, adding pressure to the exchange market.
The industrial sector also notes that the economy remains largely dollarized, even with the introduction of the ZiG currency. For instance, Hippo Valley Estates, a major sugar producer, has faced challenges with the currency. The company's revenue mix is increasingly ZiG-denominated, while suppliers are rejecting the local currency in favor of the US$.
Business leaders have expressed concerns over the scarcity of foreign currency on the Interbank Market, where the government is the primary supplier. Analysts argue that the discontinuation of the Foreign Exchange Auction System, which previously facilitated access to foreign currency for companies, has exacerbated the issue. This has left entities in need of US$ with no option but to turn to the parallel market.
This concern arises as parallel market exchange rates have surged to over US$1
22. The market's reaction to these developments has intensified inflationary pressures, jeopardizing the local currency's stability unless prompt and effective measures are taken.
Despite assurances from authorities that the situation will improve, CZI highlights that the persistent foreign currency shortages on the official market could undermine the ZiG's acceptability. According to CZI, companies are struggling to secure foreign exchange through official channels, which threatens the widespread use of the ZiG. On July 25, 2024, the Reserve Bank of Zimbabwe (RBZ) reported increased demand for foreign currency at banks, adding pressure to the exchange market.
The industrial sector also notes that the economy remains largely dollarized, even with the introduction of the ZiG currency. For instance, Hippo Valley Estates, a major sugar producer, has faced challenges with the currency. The company's revenue mix is increasingly ZiG-denominated, while suppliers are rejecting the local currency in favor of the US$.
Business leaders have expressed concerns over the scarcity of foreign currency on the Interbank Market, where the government is the primary supplier. Analysts argue that the discontinuation of the Foreign Exchange Auction System, which previously facilitated access to foreign currency for companies, has exacerbated the issue. This has left entities in need of US$ with no option but to turn to the parallel market.
Source - IOL
