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Auction floor exchange rate not benefiting ordinary citizens: MP

Dzivarasekwa Member of Parliament (MP) Edwin Mushoriwa has said the auction floor exchange rate which pegs the US dollar at just over ZWL$80 is not benefiting ordinary citizens, urging the government to look into the issue.

While the official exchange rate between the greenbacks and the local currency stands at 1:85.6 according to the latest auction results, parallel market exchange pegs the US dollar at between 120 and 150 depending on dealers.

The government has dismissed claims that the official exchange rate is imaginary and fixed.

Debating the 2021 mid-term budget review statement last in Parliament last Thursday, Mushoriwa challenged Finance and Economic Development Minister, Mthuli Ncube to address the disparities that exist between the official and parallel market exchange rates.

“Hon. Speaker Sir, most of our people are not benefiting from the formal economy where the exchange rate is around ZWL$83,” said Mushoriwa.

“The people in Dzivarasekwa and others know that the exchange rate is around 150.  What steps is the Hon. Minister taking to make sure that there is a closure between these two economies that are actually operating in the country.”

In his response, Ncube said: “The gap between the parallel market and the auction rates that needs to be dealt with – yes, I think I tried to deal with that one.  We are working hard; the SI 127 which was not very popular was designed to target that.”

He said stability besides the gap, was key in exchange rates.

“As I said, sometimes it is not so much the gap but rather that the gap is stable and if that stability is being engendered, often that delivers the result you want rather than that the gap exists in the first place,” he explained. 

“The parallel market transactions constitute the minority of transactions; the bulk of transactions are taking place in the formal market through the auction and also through the banking sector in terms of the bilateral basis but also within the inter-bank itself.”

However economic analysts have long disputed Ncube’s claim to the effect that “parallel market transactions constitute the minority of transactions; the bulk of transactions are taking place in the formal market.”

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