Parallel market exchange rate responds to RBZ measures

TREASURY has been hailed for tightening screws on money supply growth in the market, in a move credited for stabilising the foreign currency exchange rate on the parallel market.

The volatility of the foreign currency exchange rate on the parallel market experienced in June has since been arrested, with analysts noting what they described as a master-stroke in taming the negative tide by local financial authorities.

Now trading at an average rate of 1:800 from as high as 1:850 at the beginning of July, the Zimbabwean dollar is gaining value on the parallel market and analysts say it all comes back to how Treasury has managed to create demand for the local currency by addressing money supply issues.

"It is quite encouraging to note that monetary authorities have realised where the current exchange rate instability has been emanating from and I can authoritatively state that there has been significant stability of the local currency to the extent that retailers who have been shunning the local currency are now demanding it albeit good rates as well," said Denford Mutashu, president of the Confederation of Zimbabwe Retailers.

"There has been a considerable change of fortunes on parallel market rate movements since last month and this, according to the news that we are receiving, is being caused by the actions of the central bank and if you go into the streets right now, it's no longer business as usual because the market is very dry," said Tawanda Ziwerere, an economic analyst.

The government has since made a firm commitment through the 2022 mid-term fiscal review to streamline its procurement processes which have been a conduit of money supply to the parallel market through government suppliers. 

Source - ZBC