In the first half of 2004, Zimbabwean total foreign-exchange inflows amounted to $778,6-million compared with $160,7-million over the same period in 2003, Standard Bank noted in its research brief on the Southern African country citing the Reserve Bank of Zimbabwe’s (RBZ) report.
Standard Bank economist and author of the brief Robert Bunyi said the huge difference between the two figures reflects authorities’ success in the fight against the foreign-exchange black market in that country.
“Based on the figures provided in the monetary policy review we estimate 52% of this total was channelled through the foreign-exchange auction system and diaspora inflows accounted for 3% of the total,” Bunyi added.
“The ‘other’ figure probably represents amounts retained or utilised by exporters through legally allowable foreign exchange retentions in local foreign currency accounts. The ‘surrender’ figure relates to the 25% compulsory surrender to the government at Z$824.”
According to the RBZ, of the total $778,6-million inflows, $361,4-million has been used through the auction system for various purchases, including raw material, private sector fuel, machinery and parts.
The balance of $417,2-million has been used for various public-sector expenditures. This includes electricity, fuel, loan repayments and government ministries.
“Assuming the auction market serves almost all of the private sector, this would suggest that the private sector receives a 46% allocation of available foreign exchange and the public sector receives a 54% allocation. Recent auctions have seen United States dollars being offered for sale fall far short of demand reflecting rigidities in the auction system,” Bunyi noted.
Based on the private-sector-to-public-sector split of foreign-exchange allocation, it would suggest the private sector bears a heavy burden in producing foreign exchange inflows but still faces difficulties in accessing requisite foreign exchange.
“From May this year, the Zimbabwean dollar halted its depreciating trend, suggesting the RBZ had implemented a peg of Z$5 300 to Z$5 350 to the US dollar. Subsequent to this, activity on the black market increased considerably, with the exchange rate depreciating to Z$7 000 to the US dollar,” Bunyi asserted.
“Quite clearly, more flexibility in the exchange rate would narrow the differential and attract more inflows through official channels.”
He hailed ZRB governor Gideon Gono’s announcement of new foreign-exchange measures and described them as injecting flexibility into the overall foreign-exchange regime while devaluing the country’s currency. — I-Net Bridge