Industry Urges Exchange Rate Liberation to Tackle Foreign Currency Shortages


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DT Correspondent

Harare, Zimbabwe – As the national 2024 budget is set to be debated today, industry leaders are calling on authorities to liberalise the exchange rate in order to address the shortage of foreign currency that has led to rising prices.

The plea for exchange rate liberation comes amidst the scrutiny of the budget blueprint in Parliament, where stakeholders and citizens are assessing concerns and proposing necessary changes.

During submissions to the Portfolio Committee on Budget and Finance in Mt Hampden yesterday, Kurai Matsheza, the president of the Confederation of Zimbabwe Industries (CZI), highlighted that the rise in the exchange rate is primarily caused by increased liquidity, particularly through substantial government payments.

He emphasised that the underlying root cause is the ongoing expansion of the money supply.

Matsheza urged authorities to fully liberalize the exchange rate, allowing banks to establish an interbank exchange rate that closely aligns with the parallel market rate, which is determined by market fundamentals.

By removing restrictions, the need for artificial controls would naturally diminish.

He proposed the elimination of the 10 percent trading margin and advocated for businesses to set prices according to market dynamics.

“Remove the 10 percent trading margin and allow all businesses to price accordingly. By introducing measures that increase demand for the local currency, it is not possible for any business to wantonly make the Zimbabwean dollar valueless by quoting ridiculously high exchange rates and lose the Zimbabwean dollar”

He said introducing measures that stimulate demand for the local currency would prevent businesses from inflating exchange rates excessively, thus safeguarding the value of the Zimbabwean dollar.

“We have attempted numerous times to address exchange rate issues through administrative means, but we understand that such approaches are ineffective.

“By imposing more regulations, we are merely treating the symptoms rather than addressing the root causes. Let us confront the underlying issues,” Matsheza emphasised.

Economist aver that the plea from industry leaders underscores the urgent need to tackle the foreign currency shortages that have adversely impacted prices across various sectors.

“Liberating the exchange rate and adopting market-driven mechanisms could provide a more sustainable solution to the prevailing challenges, fostering stability and confidence in the economy,” said renowned economist Mr James Nheka.

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