The Confederation of Zimbabwe Industries (CZI) has stated inflationary pressures in the country should begin to ease from the end of this month thanks to the implementation of a series of policy measures.
The Treasury unveiled two sets of measures in May, including a commitment to fund a 25% export surrender requirement, maintaining the US Dollar cash withdrawal tax at 2%, adoption of all external loans by the central bank and increasing consumer access to basic commodities – by lifting import restrictions on basic goods.
In addition, the Treasury also further liberalised the Dutch Foreign Currency Auction by permitting the market to determine the exchange rates via the Willing Buyer Willing Seller (WBWS) system. Banks receive foreign currency from the Reserve Bank of Zimbabwe (RBZ) at a wholesale floor price for onward sales to clients.
The latest report from the Confederation of Zimbabwe Industries on Inflation and Currency Development for May 2023 is confident inflation will start to ease from this month, New Zimbabwe reports.
“Some of the sources of money supply growth was the funding of the surrender requirements. The RBZ had to release ZWL$ into the economy to pay for the foreign currency that it would be liquidating to exporters and use it to pay external loan obligations.
“This means that they were taking out US$ from the economy and releasing ZWL$ into the economy, resulting in an increase in the money supply. Therefore, the transfer of the obligation to the Treasury seeks to address money supply growth,” the CZI stated.
The industry organisation also said boosting demand for the local currency is key, and the new policy measures include steps to stabilise inflation, which have been welcomed.
In addition, the organisation said the new revenue measures appear well balanced, with reduced intermediated money transfer tax on forex payments to 1% providing relief to businesses that have been trading using USD.
“It will take some time for the impact of the measures to trickle down the whole economy. If the measures are properly implemented, the parallel market exchange rate is expected to start showing stabilising momentum towards the end of June 2023.
“Once stability is achieved, the blended inflation rate would be expected to mask the full impact on the ZWL$ inflation,” CZI added.
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