Key Takeaways
- Zimbabwe migrated to Multi-currency in 2008 after the depreciation in the Country's Currency
- CZI advise the government to apply the strategy agreed at the Consultative meeting
- The Community advised the Authority to stop arresting people. They should rather re-evaluate the policy for efficiency.
Kurai Matsheza, the Leader of the Lobby Community, demonstrated in a letter obtained by the News Media that the strategy used to solve the country's foreign exchange problem will only cause market unrest.
He went on to say that the Central Bank must implement the strategy that was unanimously agreed upon at a Consultative meeting in order to solve the problem.
Following the depreciation of the country's currency in 2008, the country adopted a multi-currency system, with the US dollar leading the pack.
The government did, however, consider introducing the Zimbabwe dollar as a competitor to the US dollar, which they did in 2019.
After about two years, the official rate for the US dollar to the Zimbabwe dollar is 88 Zimbabwe dollars (ZWL) per USD, while the black market rate is 170 ZWL per USD.
As a result, Zimbabwean authorities enacted legislation requiring the country's law enforcement agencies to arrest those suspected of being responsible for the depreciation of the country's native currency against the US dollar in order to halt the depreciation.
Meanwhile, the country's central bank has added those individuals to its deny list.
However, it was the action of the Authority and the Central Bank against the black market that prompted the CZI leader to write the letter in order to make the Community's position on the action known.
When a policy isn't working as it should, he says, arresting people isn't the answer. Instead, they should figure out how to make the policy more effective.
He explained that arresting people would cause unnecessary market anxiety and cause consumers to lose interest in the country's government's policies.
A true Dutch auction, according to Matsheza, would aid in price discovery and allow for a more liberal exchange rate regime.
The Central Bank established the Dutch Auction to control the issuance of foreign currency.
Many businesses, however, claim that it takes a long time to receive their foreign currency.
Due to the long period of waiting, the companies sought the USD on the black market, where they could easily obtain it.
Although the lobbying community does not advocate for the auction system to be suspended, they do suggest that the central bank make efforts to ensure that the system is properly managed in order to achieve the true Dutch auction system.
Do you think that following the CZI's advice to the government and central bank will help to restore the value of the Zimbabwean dollar?
