‘Multi-tier exchange rates distort monetary policy’

Osiphateleni

Business Reporter
THE emergence of a multi-tier exchange rate on the back of foreign currency shortages has a distorting effect on the country’s monetary policy evidenced by the mismatch between hard currency and unbacked RTGS dollars.

This is contained in a recent banking sector equity research report, which was conducted by IH Securities for the year ended June 2018. According to the study, the distortions in the financial services sector are partly to blame for the rise in inflation, as the country remains a net importer of several finished products.

“The ‘foreign exchange market’ appears to have been segmented into a multi-tier exchange rate system where RTGS dollars to USD trade on a 1-1 basis through the formal banking system with allocations focused mostly on ‘priority 1’ importers of essential goods, whilst outside the banking system, there are various tiers trading at multiple premiums,” said IH Securities.

“Bond notes are traded at a market-driven premium on the parallel market, RTGS dollars are similarly traded at a higher market driven premium,” it added.

The report revealed that premiums also vary depending on the size and cleanliness of bills and on whether the recipient is purchasing hard cash in hand or receiving an off-shore transfer of hard currency. Consequently, this has created a dilemma for foreign investors looking to invest in the country.

Reads the report: “We have observed that portfolio investors have been using fungible stock Old Mutual as a proxy for a perceived exchange rate by measuring the premium to which Old Mutual’s Zimbabwe listing trades in relation to its counterpart listings in South Africa and the UK”.

It added: “Whilst theoretically these investors fall under Priority 1 and should be able to eventually repatriate both profits and dividends on a 1-1 basis in hard currency, we have observed that such payments (portfolio) have been stuck in the queue for repatriation in some instances for as long as 18-24 months”.

According to the report, the Old Mutual Implied Rate is often used as a proxy to track the real exchange rate between Zimbabwe electronic dollars and the US dollar and ultimately to ascertain a ‘real’ value on their portfolios.

IH Securities also observed a surge in foreign investors switching out of the 4th quarter of 2017 repatriation queue to acquire Old Mutual (OML) shares before disposing of those shares in South Africa or London as a way of indirectly repatriating funds.

“Interestingly the sellers of OML were predominantly local retail investors  speculating on the premium earned when doing the reverse trade; acquiring OML shares on the JSE or LSE to dispose of on the ZSE,” said the report.

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  • tinei ganyani

    i think its now just a matter of days before zvapera because Mnangagwa by next week chaiwo anenge atove panyanga achitanga kugadzirisa zvinhu

    • zibulo

      dream on, lets see how a govt which massacres its own unarmed citizens for protesting can gain the trust and confidence of Investors !!. If they can do that to their own, what stops them from seizing from investors?They have done so before . and the same “new government members”were there too, bowing and kneeling to Mgabe and claiming to be obedient children ,kkkkkkk

      • takunda nigel

        Zibulo , what is worth seeing really is for how long Zimbabweans will continue to co-exist with pple who wish their country more suffering : from re-coopting the Mugabe`s , wanting to put fuza Chamisa in power , creating havoc to force investers away . I am sure it wont be long . The nation has no other option than to cleance itself of the dirt in its ranks . We need rehabilitate Gonakudzingwa fast .

        • Doctor Do little

          That is a silly mindset. The one that got us where we are. Any good democracy needs opposition, not robots, It is up to you to challenge his statement rather that threaten him with destruction. But then again the one Party state mentality has been ingrained in some so that when someone says something against their Party they need to be cleansed from society. People can not be programmed and if this new Government revives the economy to what it used to be they will gain peoples trust. If they don’t we will have the takunda nigel’s talking about cleansing dissenting voices. Mugabe tried and failed. So will you.

          • takunda nigel

            I think that allowing a society`s progress to be humpared (sp) by deliberate deeds of some in the name of opposition politics , democracy of sorts , is irresponsible in the extreme . When a mature man , a lawyer trained at the expense of the peasant taxpayer`s cost boasts of being able to make the country not access funds it needs , resulting in further hardships , then your textbook concepts of democracy become irrelevant . In fact it could be argued that you are aiding and abating such behaviour (sp) . What do you make of the argument that farmers should not be given implements until Chamisa is declared President ? Admissible ? Democratic ? Inclusive ?
            I do not see anything wrong with a one direction society if it admits to recall of leaders who lose direction . I do not need your childish views on this .

          • Doctor Do little

            I think you have the childish views since you do not even acknowledge a simple statement. My comment was not based on Biti but on your threat to cleanse the country of the likes of Zibulo. Biti can take care of himself. You on the other hand are a dying breed. It happened in Eastern Europe it will happen in Africa. You think you can bully people into your ideology? Think again. Another thing I promise you will get my so called childish views if you continue to try and threaten people here. Unless of course you have control of a cowardly moderator. You need to MAN UP.

          • takunda nigel

            You talking fiction , loser !

          • Esixvele

            Your poorly articulated writings suggest that you are some poorly paid worker in the nations security sector. Alternatively, you’ve now retired and work as an even more poorly paid security guard. What ever the case is, you are not convincing anyone who is sane on this platform; neither are you making any friends. People like you should be reviled with all the contempt they deserve!!

          • zibulo

            you are very full of ZANU Characteristics !! you lie, insult, disrespect, stereotype other citizens , dont give space to constructive criticism , believe in genocide yet you do not learn from what has happened to the Hitlers,Mgabes,Gadaffis,etc. apart from Mgabe the rest died shameful deaths,some caught hiding in sewage pipes,some in pits/disused mines maybeermeging with sagging moustaches !! you do not learn that the Earth has eyes and eyes and protects all who live on it. Ypu want to “wipe away” the killings of 20 000 unarmed people.is that the reason why you blame MDC for the shooting of 6 unarmed protesters, akumangalisi. How the end comes to people like you should be scary but awufundi.

          • Esixvele

            He obviously has a sore hangover from that dark era in which the deposed tyrant played God with our lives. People like him make me sick to the gut! Such persons do not post enhance the knowledge or lifestyles of others; rather they do so to annoy like the character Roddy often does. Yet it’s good to know that most users are sensible in their behaviour on this platform. Aside from that my friend, I sent you greetings. Yes it the same “me” with a new face and slightly altered name. Happy writing and a happy, safe, peaceful and fruitful holiday to you!!

        • Esixvele

          …..cleanse itself of the dirt in its ranks ….. are slyly making reference to the implementation of another “gukurahundi,” with the intention that this will strike terror into the hearts of dissenting voices in the region. Well f*ck you! You want another genocide of our people; just bring it on. This time around things will workout differently. Situations have changed concerning who holds power in our southern neighbour. Besides this, even though SADC and AU nations have blindfolded themselves to the true circumstances in our nation, the world at large is watching wide-eyed!

        • zibulo

          rehabilitating Gonakudingwa is NOT FREEDOM,it was one of the reasons why we went to War to fight those who built it in the first place. So are we to go back to those days only because there are those who “deserve” power both in the old and “new”days of Zim? freedom means that FIRST a president starts with Uniting Citizens, works on all forms of Division (tribalism, racism), gives citizens power ,freedom ,human rights , so that we do not have fellow brothers like you who love to smell the blood of their brothers. what we cry about is genuine and i do not know how you became like a cold blooded animal to think the way you do . in peace times in really peaceful countries people like you do not have a place