While the intentions of government in promulgating the SI are noble and appreciated, there are some unintended consequences that we see resulting from the application of the SI. These include the following:
The immediate impact of applying the SI would be that US dollar prices will be hiked so as to result in the same ZWL price prevailing prior to the SI. This means an immediate spike in USD inflation, a component of our blended inflation rate.
Companies have been relying on local US dollar sales to generate the bulk of foreign currency used to sustain operations. Use of the auction rate would result in consumers converting their US dollars to ZWL on the parallel market prior to purchasing, a practice already rampant outside the major retail chains such as Pick n Pay, OK and Bon Marche.
This will deprive companies of what has become their main source of foreign currency.
Demand for foreign currency on the Auction is going to increase significantly as this becomes the only source of foreign currency in the absence of domestic sales in US dollars.
There is not likely to be a corresponding supply side increase in the amount of US dollars coming onto the auction, which will either result in an increase in the delays on disbursements, or a sharp increase in the rate.
To date, our members still have their allocations on the auction pro-rated, thus a surge in demand on the auction is likely to exacerbate this problem and cause a slowdown in the economic recovery and job creation witnessed to date.
Goods such as fuel are priced in USD and companies cannot bid for local payments at the auction. Inability to sell in US dollars locally will thus cause supply chain issues unless service stations are also compelled to sell fuel in ZWL at the prevailing auction rate. Such a pronouncement however has led to fuel shortages in the past and thus is undesirable.
CZI recommends that implementation of the SI be suspended, and urgent stakeholder consultations be held between government and business to come up with a way forward that will not jeopardise the rebound witnessed in the economy to date.
Some of the issues we believe government needs to take into consideration are:
Confidence is at the centre of all fiat currencies, and it is important to avoid policy misperceptions that may result from well-intentioned Statutory Instruments.
The path to de-dollarisation must be more clearly defined and will need stakeholder buy in along the way for confidence.
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