Exchange controls squeeze retailers

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ZIMBABWE’S formal retail sector is teetering on the brink as stringent currency controls hamper competitiveness and drive consumers towards the burgeoning informal market.
The crux of the issue lies in the in-store “willing buyer-willing seller” exchange rate, currently set at 10 percent above the central bank’s auction rate.
Retailers argue this “artificially inflated” rate puts them at a significant disadvantage compared to informal players operating outside the regulated system.
“On its own, the use of the official rate is not a bone of contention, but its valuation of the local currency unit lags so much behind the open market that it creates distortions and opportunities for arbitrage by various economic players,” OK Zimbabwe chief executive, Maxen Karombo, said.
“The 10 percent cap or limit on what a formal retailer can use in translating Zimdollar into US dollar prices results in unnecessarily expensive US dollar prices, thereby driving inflation higher.