By Alois Vinga
INDUSTRY lobby group Confederation of Zimbabwe Industries (CZI) has called for increased access to the US$ as a key condition towards stabilizing the ZWG currency.
The remarks come on the back of volatility choking the local currency experienced in recent weeks. To ease the pressures, the Reserve Bank of Zimbabwe (RBZ) devalued the ZWG by 43% and increased the interest rates to curb speculative borrowing.
The central bank also increased participation in the interbank market as a way of easing pressures on the parallel market which most companies were turning to in search of the greenback.
However, in its latest inflation tracker, the CZI said increasing wider access to the greenback is the only way to ease exchange rate depreciation.
“The depreciating ZWG on the parallel market has a risk of causing long-lasting inflationary pressures unless it is controlled. Controlling the parallel market exchange rate can be achieved by enhancing access to foreign currency by a wider market,” the lobby group said.
The lobby group said that given that currently there is not enough foreign currency for every possible importer, there is a need for policies to continue to prioritise demand for the local currency.
“While the requirement to pay QPDs in local currency was a positive step, for most firms the ZiG that they get from the surrender requirements is more than enough to settle their QPDs as profitability has significantly shrunk as businesses try to remain competitive,” the tracker said.
CZI underscored that Corporate tax is currently the worst-performing tax head in terms of overall tax contribution, thus, selecting such a tax head as the basis for the demand for ZiG is bound to have minimal traction.
The government was told to be bold enough and select a performing tax head, such as PAYEE as the basis for the requirement to pay 50% in local currency.
“It is not expected that the inflationary pressure will tap within the short term unless these measures aimed at creating demand for local currency are enhanced beyond the current QPDs as most businesses are in loss positions and hence remain unaffected,” added CZI.
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