WHILE prices in Zimbabwe are influenced by the US dollar because of inflation, the inter-bank rate which happens to be the only legal way of pricing in the country has left the country’s products costing about five times more than in other parts of the world.
Most outlets are using the street parallel market rate, which they say is the fair value as opposed to the “controlled” inter-bank rate.
Some companies are appearing to be using the transfer rate which is nearly 25 times more than the interbank rate.
The gap between the interbank and parallel markets widened further yesterday as rates on the parallel market made significant jumps.
Traders on the parallel market were yesterday quoting above $95 ——$100 to the US$, up from around $40 to the US$ before the holiday.
On the interbank market, the greenback was trading at $14,5 yesterday from an average rate of $10 to the US$ on Friday last week.
The South African rand was being quoted at above $9,5 to R1 surging from between $3-$3, 3 to R1 during the same period while the Botswana pula surged from $5 to above 11/pula.
As the gap between the interbank and parallel foreign currency market rates continues to widen, most banking institutions last week virtually stopping trading in foreign currency for about a week.
When Reserve Bank of Zimbabwe Governor Gideon Gono introduced the interbank rates in May, banks were offering lucrative rates, resulting in many people using the banks to change their money.
Gono hoped the announcement would license more institutions to act as authorised dealers for the foreign currency.
However, the interbank rates started tumbling after the Reserve bank unearthed corrupt practices among some of the dealers, with Genesis Bank’s licence being suspended for nearly two months.
The Reserve bank said it had carried out investigations into many banks that were accused of flouting regulations while dealing in foreign currency. The results of the investigations have however not been made public.
A number of people have lost their money after trading through the informal traders.
Following the failure by the country’s main parties to sign a deal that would turn around the economy, market analysts said parallel market rate was likely to continue rising with price of goods and services responding the rate.
Arthur Mutambara, the leader of the other faction of the Movement for Democratic Change (MDC) on Wednesday said the country’s political rivals had “agreement on everything except on one aspect”.
“Morgan Tsvangirai has requested time to reflect and consult,” Mutambara told reporters. “Three times he agreed to this one aspect and three times he changed his mind.”
South African president Thabo Mbeki who is mediating the talks is said to have said the power-sharing talks could still succeed “soon despite disagreements over leadership” after failing to secure a deal at marathon talks.
The Southern African Development Community (Sadc) this week said they were prepared to assist the region’s trouble maker after the signing of MoU which is expected to come up with feasible economic turnaround package for the country this week.
Zimbabwe has been accused of holding back regional growth.
Zimbabwe’s economic migrants over its borders are straining regional diplomacy and making the whole neighbourhood look bad for failing to end the crisis.
While the region’s highest inflation is 12,9%, Zimbabwe’s inflation is said to be 2 200 000%. The country is the only one with a negative Gross Domestic Product.
According to the International Monetary Fund (IMF) Sub-Saharan Africa’s gross domestic product grew almost 90% between 1997 and 2007 in purchasing power parity terms. Zimbabwe is said to have shrunk by over 30%.
By Paul Nyakazeya