Paul Nyakazeya, Group Digital Editor 
EXPERTS have implored authorities to keep a beady eye on parallel foreign currency activities so that they do not jeopardise the recovery of Zimbabwe’s economy.
Speaking to The Financial Gazette this week, the experts said the last thing the country needed now was to see a disruption of its foreign currency auction system — which had helped to stabilise the local economy.
Economist, John Robertson
Of particular concern to the experts was the growing gap between the official and parallel forex rates in recent months, amid fears that this could soon erode market confidence.
This comes as the foreign currency auction system has been widely acclaimed for taming the country’s once rampant forex black market — thereby boosting the Zimbabwe dollar and steadying the prices of goods and services.
It also comes at a time the government has said it was not happy with heightening market indiscipline that had recently witnessed “unjustified prices increase” — despite the fact that the majority of producers and importers get their foreign currency from the auction system.
At the same time, the African Development Bank (AfDB) has said it is vital that the government implements more effective and creative measures to sustain the country’s foreign currency management regime.
Renowned economist John Robertson was among the experts who told The Financial Gazette this week that while the auction system had improved “a very bad situation”, more needed to be done to shore up the Zim dollar.
“Currency traders at black-market exchange rates should face prosecution, but a single trustworthy exchange rate for converting local money into foreign money, as well foreign money into local money would eliminate the illegal currency market.
“Growing confidence would see investors return, more local factories supplying our needs, more jobs, more tax revenues for government and municipalities, more spending and even more investment.
“We should never stop working for these huge advantages,” Robertson said.
Axia chairman, Luke Ngwerume also recently called on monetary authorities to work even harder to reduce the forex arbitrage gap.
“We are concerned that current trends are showing an ever-increasing gap between the official auction and market rates.
Luke Ngwerume, Axia Corporation
“The result of this growing level of arbitrage is that exporters are being denied more and more the value of their efforts, which will eventually translate into less foreign currency generation for the country, with concomitant negative effects on the entire economy.
“We urge authorities to reduce this arbitrage gap,” Ngwerume said in the company’s financials.
In an effort to curb the parallel market further, the government has suspended 12 companies from the foreign exchange auction system, on suspicion that they were involved in transfer pricing and channeling part of their funds from the auctions to the parallel market.
Econometer Global Capital, a local research unit, has also said that the auction system should do more to ensure that prices remain stable.
“The discrepancy between the official rate and the parallel market rate continues to widen and retailers have responded to this. Consumers will pay an arm and a leg for this distortion.
“Addressing structural issues in this economy, as well as adopting far-reaching reforms that will unlock concessionary funding may be the only sustainable way going into the future,” it said.
On its part, the Confederation of Zimbabwe Industries (CZI) has said that the failure by authorities to avail foreign currency on time was forcing companies to go to the parallel market for their forex needs.
“The exchange rate premium between the official and parallel market rates is widening. Some companies have complained that it was taking too long for them to access foreign currency at the auction market, which creates the possibility of sourcing forex on the parallel market,” it said in its latest inflation and currency report.
But Reserve Bank of Zimbabwe (RBZ) governor John Mangudya has dismissed the obtaining parallel market rates as a false reflection of the true value of the local currency against major currencies.
Speaking during a Daily News monetary policy review webinar, the secretary for Finance — George Guvamatanga — also said the auction exchange rate represented the proper market trends, contrary to the contrived perception that the parallel market suggested.
He added that people should move away from the misconception that the open market trend was the real exchange rate, because such an assumption was not supported by economic or empirical evidence.
“We are very much worried about the extent of the current levels of indiscipline and the government strongly supports action by the RBZ to mete out the necessary punishment for those who are abusing the auction system,” he said.
This comes as the RBZ has predicted more economic stability, on the back of improved foreign currency inflows which continue to shore up its forex auction system.
It also comes as industry has forecast capacity utilisation to increase significantly as a result of improved access to foreign currency at the auction system.
Meanwhile, the AfDB, in its latest African Economic Outlook report notes that: “Zimbabwe’s economic situation will remain challenged in 2021 although the foreign exchange reforms, especially the weekly forex auctions introduced in June 2020, could create price stability and create room for modest economic recovery. “Modest economic recovery is projected in 2021, if effective measures are taken to stabilise foreign exchange … But the outlook is clouded by a number of factors.”
The pan-African lender also predicted the economy to grow by 4,2 percent this year and three percent in 2022 — a figure that is lower than the 7,4 percent projected by the government in the 2021 national budget.
Since June last year, when the country introduced the foreign currency auction system and other monetary and fiscal measures, the Zimbabwe dollar has held steady against the United States dollar and other currencies. The local unit has been trading at below $85 to the coveted greenback on the official market.
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