Yesterday the interbank market reached a milestone that its creators would surely have not wanted to see, the rate for the RTGS dollar against the US dollar closed at 5.07. This marks a 108% increase since trading started on the market on February 22 earlier this year – just 4 months ago. This will come as another blow to its proponents who were happy to announce a US$500 million facility that was meant to stabilize the market. No such luck here.
In contrast, the parallel market rate has moved approximately 80% in the same period (quoted at 4.15 on February 22 and 7.3 on May 28). Despite Reserve Bank Governor John Mangudya’s prediction that the two rates would converge in the month of June or July the spread between the two continues to grow as it now stands at 2.23 ( 1.55 at the date of inception). As a percentage, the interbank market has closed the gap with a discount of 43% currently while it was 66% at inception. The difference is academic as the market is not open to everyone and can barely supply those it is open to.
With the Reserve Bank cutting off fuel price subsidies to importers and sending them to the interbank market the rate increase was almost inevitable. The apex bank last Friday said they would avail US$500million for the interbank market under unclear circumstances, little had been spoken of it since but the price action on the market should tell us that the supply side has not been enhanced much.
Finance Ministry permanent secretary George Guvamatanga while speaking before the parliamentary portfolio committee on budget and finance pointed out that the most important part of a liberal market was a willing seller and our interbank market simply did not have those. While he was shy to indicate why the market did not attract sellers of foreign currency we covered the unattractive price in our analysis on the failure of the interbank market.
Guvamatanga bemoaned the delays experienced in export receipts being repatriated to Zimbabwe perhaps insinuating that exporters are making deliberate efforts to avoid holding foreign currency as they fear another raid of foreign currency accounts by the government.
There’s a saying “never forget the golden rule”. The golden rule states that “he who has the gold, makes the rules”. The formation of the interbank market involved high-level meetings between banks and officials but did not involve or at least take heed of the concerns of exporters, those who had the foreign currency. As a result, the market has failed to meet the needs of industry and playing very slow game catch up with the parallel market.