The Business Times reports that a working group comprising CZI, RBZ, Ministry of Industry and Commerce, Ministry of Finance, Industrial Association of manufacturers has made recommendations to government on the overhauling of the interbank foreign currency exchange market. The group met to discuss the way forward on rampant price increases that are largely attributed to foreign currency shortages.

The discussions of the group were focused on 14 basic commodities which have, like everything else in the economy, been subject to price hikes that have seen year on year inflation comes in at 75.86% for the month of April 2019. This discussion was going on at a time when the interbank market rate had been pushed to 3.4 while the parallel market had galloped away to 6.1 with rumours of even higher rates in the market. This left many distraught.

Among the calls were recommendations that the government should come in and buy as a regular participant on the foreign currency market. Interesting calls after the Reserve Bank of Zimbabwe recently admitted that they had printed an additional $12 million of bond notes that were used to pay tobacco farmers. Strange activity given these are times of surplus. Players also recommended the removal of administrative controls by the government on the market to allow for a true willing buyer and willing seller platform and not the current set up we have.

On Saturday the Reserve Bank of Zimbabwe sought to inform the nation via Twitter that they will be “drawing down” US$500 million to avail to the interbank market and ease supply-side problems. Backed by tweets from the minister of Finance, Mthuli Ncube no information was made available as to where the funds were being drawn down from or the details of the arrangement. A surge of the price in the parallel market last week has to lead many to comment on the auspicious timing of governments drawing down of this US$500 million and what is believed to be a huge buyer entering the market last week. ZESA also made claims they were seeking US$80 million to pay Eskom for electricity imports so they can regularise power supply.

CZI President Sifelani Jabangwe said that industry needs US$300 million while the interbank market had only traded US$85 million. The total backlog for foreign currency allocation is well over US$800 million now. These are hefty figures bearing in mind that this does not include the needs of the informal sector. So it will be interesting to see what effect the US$500 million (if in fact, it is) drawn down will have on the market and how long it can stabilize the market.

This has been a key point of failure for the interbank market and while discussions are being carried out with the right spirit, exclusion of the bulk of the nation mean that proposals will be lopsided at best. The interbank market is not inclusive and thus can never be the leading market.