Zimbabwe is urged to abandon its command exchange rate for the Zimbabwe Gold currency as businesses struggle under imposed price controls. The Reserve Bank of Zimbabwe is urged to allow the currency to float freely due to persistent distortions and economic instability. Retailers report unsustainable conditions, with widespread dual pricing amid inflation concerns.
The Zimbabwean government is facing mounting criticism to abandon its command exchange rate for the Zimbabwe Gold (ZiG) currency, which was introduced in April. This situation arises as businesses are struggling due to the currency distortions caused by the mandated adherence to the official exchange rate. Retailers are compelled to adjust their prices in ZiG to mitigate losses as the local currency continues to diminish in value on the parallel market. Economist Gift Mugano has vocally opposed the current economic strategy, advocating for the Reserve Bank of Zimbabwe (RBZ) to permit the ZiG to float freely. Mugano stated, “The central bank must liberalize the exchange rate. We are in the midst of a storm, and while the right policies must be implemented, the necessary groundwork to make this work wasn’t laid before the ZiG was launched.” In response to economic instability, RBZ Governor John Mushayavanhu instituted heightened measures against supermarkets breaching government exchange rate regulations and warned of possible license revocation for offenders. Nonetheless, currency discrepancies have continued, with the ZiG trading significantly higher in the parallel market than the official interbank rate. Economists and business leaders are ringing alarm bells. Vince Museve indicated that the current state is untenable, noting that the value of the ZiG has increasingly diverged from the price of gold, being manipulated instead by market sentiments. “This market is mainly informal and not influenced by RBZ policies,” Museve explained. The Retailers Association of Zimbabwe corroborated these observations, reporting that suppliers have resorted to maintaining dual pricing lists—one for local currency and another for foreign currency—due to foreign currency scarcities and extreme volatility in the ZiG’s rates. The association asserted, “This situation is unsustainable,” emphasizing that price increases in USD terms have exacerbated inflation and prompted consumers to abandon formal retailers for informal market options. Denford Mutashu, the president of the Confederation of Zimbabwe Retailers, stressed the need for constructive dialogue between the government and the business sector to navigate the ongoing crisis. Despite governmental attempts to inject over US$100 million into the market to stabilize currency values, the ZiG was trading at rates between ZiG35 and ZiG40 per US dollar on the alternative market, in stark contrast to the official interbank rate of ZiG13.98. Analysts are concerned that this widening gap may perpetrate further exploitative practices, thereby intensifying the nation’s economic malaise.
The topic at hand pertains to Zimbabwe’s economic challenges, particularly regarding its commanded exchange rate for the Zimbabwe Gold currency. Introduced in April, this initiative aimed to manage currency values amid a struggling economy. However, it has resulted in severe distortions, particularly affecting retailers who are unable to maintain sustainable operations under the prevailing pricing pressures. Economists and retailers alike are calling for a more flexible exchange rate to alleviate the crisis that the country’s economy is presently facing, compounded by a significant disconnect between official and parallel market rates.
In summary, the government of Zimbabwe is under increasing scrutiny to abandon its command exchange rate for the Zimbabwe Gold currency, as retailers face an untenable situation due to currency distortions. Economists advocate for a liberalized exchange rate approach to restore stability. While government measures have been implemented to control the discrepancies, the persistent gap between official and parallel market rates continues to threaten the retail sector, necessitating urgent dialogue between government and business leaders.
Original Source: bulawayo24.com
