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CZI warns of rising black market dollar demand
2 hrs ago |
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Zimbabwe's manufacturing sector has increasingly turned to the parallel market to source United States dollars amid tightening foreign currency conditions, according to the latest report by the Confederation of Zimbabwe Industries (Confederation of Zimbabwe Industries).
The business lobby said firms are struggling to access sufficient foreign currency through official channels, forcing many to rely on the black market to meet urgent import and operational obligations.
It noted that while the Zimbabwe Gold (ZiG) currency strengthened slightly on the official market—gaining about 0.9% between March and April—it weakened by around 4.2% on the parallel market over the same period.
This widening gap, the CZI said, pushed the exchange rate premium from below 20% in March to nearly 25% in April, reflecting growing strain in the foreign exchange system.
"The widening premium can be attributed to heightened demand for foreign currency, as businesses increasingly turn to the parallel market to meet immediate payment obligations," the report said.
Manufacturers, who rely heavily on imported inputs, are among the most affected, with fuel imports cited as a major pressure point when official allocations fall short.
The ZiG currency, introduced in April 2024 to replace the Zimbabwe dollar, has been supported by tight monetary policies aimed at stabilising exchange rates and curbing inflation. However, businesses say liquidity constraints persist.
CZI also reported that inflationary pressures intensified in April, with month-on-month inflation rising to 1.1% from 0.5% in March, driven largely by fuel and transport costs.
It said global geopolitical tensions, including the Israel–US–Iran conflict, contributed to rising fuel prices, which in turn increased production and transport costs across key sectors.
"Rising month-on-month inflation increases operating costs, particularly through fuel, transport, and input prices," the report said.
Several consumer items recorded notable price increases, including gas, fuels and lubricants, and transport services, reflecting Zimbabwe's continued vulnerability to global energy shocks due to its reliance on imported petroleum products.
Year-on-year inflation also rose to 4.8% in April, up from 4.4% in March, signalling a gradual return of price pressures after a period of relative stability.
Despite these challenges, the industry body said inflation remains contained compared to previous volatility periods, crediting tighter monetary policy for limiting broader price escalation.
However, it warned that rising costs in essential services such as fuel, transport and sanitation are beginning to place pressure on business margins and consumer purchasing power.
"For firms operating in price-sensitive markets, the ability to pass on these costs remains constrained," CZI said.
The report highlights ongoing tensions between currency stabilisation efforts and liquidity shortages, as businesses continue to navigate a complex and uneven foreign exchange environment.
The business lobby said firms are struggling to access sufficient foreign currency through official channels, forcing many to rely on the black market to meet urgent import and operational obligations.
It noted that while the Zimbabwe Gold (ZiG) currency strengthened slightly on the official market—gaining about 0.9% between March and April—it weakened by around 4.2% on the parallel market over the same period.
This widening gap, the CZI said, pushed the exchange rate premium from below 20% in March to nearly 25% in April, reflecting growing strain in the foreign exchange system.
"The widening premium can be attributed to heightened demand for foreign currency, as businesses increasingly turn to the parallel market to meet immediate payment obligations," the report said.
Manufacturers, who rely heavily on imported inputs, are among the most affected, with fuel imports cited as a major pressure point when official allocations fall short.
The ZiG currency, introduced in April 2024 to replace the Zimbabwe dollar, has been supported by tight monetary policies aimed at stabilising exchange rates and curbing inflation. However, businesses say liquidity constraints persist.
CZI also reported that inflationary pressures intensified in April, with month-on-month inflation rising to 1.1% from 0.5% in March, driven largely by fuel and transport costs.
It said global geopolitical tensions, including the Israel–US–Iran conflict, contributed to rising fuel prices, which in turn increased production and transport costs across key sectors.
"Rising month-on-month inflation increases operating costs, particularly through fuel, transport, and input prices," the report said.
Several consumer items recorded notable price increases, including gas, fuels and lubricants, and transport services, reflecting Zimbabwe's continued vulnerability to global energy shocks due to its reliance on imported petroleum products.
Year-on-year inflation also rose to 4.8% in April, up from 4.4% in March, signalling a gradual return of price pressures after a period of relative stability.
Despite these challenges, the industry body said inflation remains contained compared to previous volatility periods, crediting tighter monetary policy for limiting broader price escalation.
However, it warned that rising costs in essential services such as fuel, transport and sanitation are beginning to place pressure on business margins and consumer purchasing power.
"For firms operating in price-sensitive markets, the ability to pass on these costs remains constrained," CZI said.
The report highlights ongoing tensions between currency stabilisation efforts and liquidity shortages, as businesses continue to navigate a complex and uneven foreign exchange environment.
Source - The Independent
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