Zimbabwe gives business two weeks to peg prices on auction rate

Zimbabwe has given business, especially those now accessing foreign currency from the auction system, to price their goods at the auction rate.

Finance Secretary George Guvamatanga said the government was monitoring the situation closely and had observed that some businesses that were accessing foreign currency at the auction rate were pricing their goods at a parallel market rate of up to $100:1.

“This is the last point of moral persuasion to the banks, the errant banks, and to the errant corporates. This is the last point of moral persuasion. And we have shown in the past that if we believe that this behavior is severe, we will also respond exactly in the same manner,” Guvamatanga said.

“What we are now expecting is that if you are accessing your money at $82, price your goods at $82 and get your normal business margin. Don’t go for a foreign exchange margin. You are not a bank. You are not a bureau de change.”

The Zimbabwe dollar is currently trading at $82.92.

Over the past two weeks, Zimbabwe has met all foreign currency bids that qualified.

Businesses with sufficient funds in their foreign currency accounts are disqualified from the auction.

“I have always accused corporates here of being foreign exchange traders, we are simply saying go back to your normal business,” Guvamatanga said.

“We are monitoring closely and we will watch developments over the next two weeks, but if there are no improvements, don’t say I did not warn you.”

Guvamatanga said Zimbabwe had enough foreign currency to meet at least three months of imports.

He said the country was sitting on US$1 billion in nostro accounts. Its critical import requirements were only US$200 million. After deducting money for non-governmental organisations and development partners which was US$300 million, that left the country with US$700 million which was enough for three months’ imports.

Guvamatanga dismissed reports that the country was in a crisis saying it was running a surplus that was able to support up to one million vulnerable people but at the moment only 116 000 were receiving grants because most people had not been able to register due to the outbreak of the coronavirus pandemic.

He also said the current government had reduced the civil servants wage bill from 96% of government expenditure to 50% and was fully financing the building of schools and roads as well as expenses to deal with the coronavirus pandemic.