Zimbabwe’s biggest industrial lobby group has warned that the local currency is on the brink of “rejection” if the government does not take urgent steps to rescue it.
The Confederation of Zimbabwe Industries (CZI) made the warning in an April 22 advisory obtained by The Standard as the government showed signs that it is panicking about the deteriorating currency situation.
President Emmerson Mnangagwa yesterday vowed that his government would take stern action against companies that were allegedly sabotaging the local currency to fuel an uprising.
“We know these days we have problems with the economy and prices that are just going up and troubling people.
“We have plans that we are rolling out,” Mnangagwa told Zanu PF supporters at the ruling party’s victory celebrations held in Epworth.
“We are catching some of the companies, who are doing this.
“They are not doing this by themselves, but are being sent by outside countries. We are coming up with ways to deal with them.
“We are closing some banks doing that.
“We will be dealing with other big companies, who are working with outsiders that are manipulating the exchange rate to bring suffering to our people.”
Mnangagwa said this was part of a wider plot to remove him from power, and said Zanu PF was not going anywhere.
“They are fighting us in an effort to induce an uprising against us.
“However, we want to be close to our people so we won’t allow that,” said Mnangagwa.
“Zanu PF is here to stay forever. It’s not going anywhere. The party will not get lost because it’s in the people.”
CZI, however, blamed the currency crisis on government policies and the Reserve Bank of Zimbabwe (RBZ) foreign currency auction system.
“CZI believes what we are witnessing on the Zimbabwe Dollar (Z$) is tantamount to a bank run on the Reserve Bank of Zimbabwe,” the body said.
“Aggressive, transparent and visible actions are the only way to save the Z$ and stop the bank run.
“We are at a point where what to do is just as important as what should not be done.
“Mono currency without international reserves should not be done as the economy is not ready for mono currency.
“Foreign currency accounts should not be raided as has happened before with serious consequences of loss of value at all levels of business and society.”
CZI said it was important that a balanced approach is taken to bring back “the local currency from the brink of rejection that it faces now in the face of exchange rate instability and increasing inflation.”
“We must also by all means avoid the rushed decision to prematurely introduce a mono currency as the consequences of such are known from the recent past,” it added.
“This approach should take the local currency to the point where it is absolutely trusted by both government and citizens as the preferred medium of exchange ahead of any other currency and as the most credible store of value of any savings deposited in any commercial or savings bank under RBZ supervision.
“A lasting solution to a stable exchange rate is now long overdue for a stable inflationary environment.”
The auction should be suspended until the backlog is cleared and published as such.
The industry lobby body said the Zimbabwe dollar must not be phased out of circulation.
“Aggressive, transparent and visible actions are the only way to save the Zimbabwe dollar and stop the (run on the RBZ),” CZI said.
“Allow the currency auction to perform a price discovery role for the efficient allocation of foreign currency.
“This implies true Dutch Auction principles as originally envisaged are implemented.
“It would further increase flows of foreign currency into the formal system through the participation of willing buyers.”
As of yesterday, the local currency was trading at US$1 to $350 on the parallel market against $152 on the central bank’s auction system.
Mnangagwa has often said there are no plans to dollarise, saying the Zimbabwe dollar which was introduced in 2019 was here to stay.
But economic analysts have warned that the economy was self-dollarising, with almost all goods and even government services charged in foreign currency.
— The Standard