Industrialists have dismissed the effectiveness of statutory instrument 127 in addressing Zimbabwe’s foreign currency challenges, ENN reports. The Confederation of Zimbabwe Industries (CZI) has issued an industry policy response to a recent statutory instrument (SI 127) that makes it illegal for any business to price its products outside the managed foreign exchange rate.
Zimbabwe adopted a dual pricing system in 2020 as authorities struggled to term the country’s runaway inflation. At present, you require ZWL$130 to buy a single US dollar on the black market. On the government managed foreign currency auction system, the exchange rate is at US$1 to ZWL$85. It is this thirty-five per cent exchange rate discrepancy that has created opportunities for arbitrage. Consequently, Zimbabwe is fast moving towards full dollarization, and Statutory Instrument 127 is the government’s de-dollarization strategy.
In their comprehensive response to the government’s latest interventions, industrialists have called on the government to immediately suspend SI 127 for its ills. They fully acknowledged that the ministry of finance is trying to control inflation, eradicate the use of the black and informal markets, bring stability to the foreign currency markets, and prevent abuse of forex obtained via the auction system for self-enrichment. The industrialists further state that the statutory instrument will achieve the exact opposite of the ministry’s objectives. Key points raised against Statutory Instrument 127 to buttress their position are as follows:
- The SI will reduce the amount of foreign currency in the formal channels
- It will also create USD inflation which will weigh down on business viability
- The SI will bring businesses that were able to generate their own forex through direct sales to the auction system, in the process increasing demand for the greenback
- The auction system is viewed by the market as a controlled rate, and this new SI may take us back to the dark days of the black market.
- It will reduce forex revenues for government as forex deals go informal
- It will affect farmers whose produce prices are fixed as the parallel rate looks set to take over and crash the market.
It remains to be seen if the government of Zimbabwe will give an ear to its revenue generators in industry and commerce by suspending Statutory Instrument 127.