So far, no pay-off for Zimbabwe

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The central bank itself has not been too thrilled by recent developments. Two weeks ago Mangudya said exporters risk losing their forex if they do not utilise the currency within a month. It was a marked departure from the willing-buyer, willing-seller policy he punted just a few weeks earlier. If exporters fail to sell their currency within 30 days, they will be paid out in local currency at a rate not reflective of the fair value of the unit.

According to bankers, it is the forex supply side that is proving problematic. ZB Financial Holdings CEO Ron Mutandagayi says that though appetite is strong for buying, it is limited on the sell side. “We expect the sell side to pick up once exporters begin to surrender their proceeds after the expiration of the 30-day period,” he says.

This could trigger a rush to use foreign exchange balances to avoid selling at below-market rates, analysts say.

Bankers say the central bank has to allow the market to decide the exchange rate, given that it is reluctant to go for a wholesale devaluation of the currency. At present the central bank plays a major role in determining the rate. While it wants to devalue the currency and undermine the parallel market, it seems hesitant for fear of unintended consequences, such as a return to unrest.

“It’s a big headache for the central bank. The question is whether to devalue the exchange rate in line with the parallel market and how soon [the bank] can do it. It would like to do it in phases before getting to the parallel market rates,” a banker told the FM last week, on condition of anonymity. “These decisions are mostly 60% political and 40% economic.”

The exchange-rate problem is not the central bank’s only major headache: inflation is proving as big a challenge.

Annual inflation to February was up 2.49% to 59.39%, while inflation for food and nonalcoholic beverages, which is prone to transitory shocks, was at 69.84%. Month-on-month inflation tumbled to 1.7%, from 10.8% in January. But no-one is celebrating that slowdown: there are concerns the government could be tweaking the numbers, after finance minister Mthuli Ncube said last month that Zimstat, the government-run statistics body, was using the wrong basket for its consumer price index (CPI) calculations. It’s not clear whether Zimstat has changed its CPI sample basket at the behest of the minister and whether this accounts for the drop-off in inflation.

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