Sunday, July 08, 2007
By Kingsley Kaswende in Harare
Friday July 06, 2007 [04:00]
ECONOMISTS in Zimbabwe have said the only way to bring stability in the troubled economy is to strictly control the ballooning foreign exchange rates on the illegal parallel market. And the order by government for traders and service providers to reduce their prices and charges has been strengthened, with law-breakers risking jail sentences, forfeiture of their goods or closure of their businesses.
Economic analyst Callisto Jokonya, who is also president of the Confederation of Zimbabwe Industries, said most businesses in Zimbabwe had been operating on the black market, causing rates to balloon thereby forcing the formal sector to go informal. Most prices of goods and services in Zimbabwe have largely been influenced by the illegal parallel market, which is thriving.
The rates on the parallel market, which are up to 400 times more than the official exchange rates, constantly fluctuate in response to the whims of the buyers and sellers during a given day or time. Jokonya said the on-going crackdown on price cuts should also extend to illegal foreign currency traders if macro economic stability was to be achieved.
“Unfortunately we find business operating at the black market level because we have been forced out of the formal market. The whole economy has been forced into an informal market,” he said. “That is what is not pleasing to business. The reason why businesses have found themselves operating on the parallel market is because the price of foreign currency is not right.”
Another economist, Goodwill Masimurembwa, urged the government to devise a foreign currency management system that would respond to economic fundamentals.
Masimurembwa also urged the government to capacitate the Anti-Corruption Commission to decisively deal with illegal market dealers.
“We need discipline in the business community and in our country as a whole that what we want to preserve is our own economy. It is these people who are operating in business who make a conscious decision to go to the person who is dealing on the illegal parallel market and buy, and therefore balloon those rates. If business and individuals shun the parallel market, that money will be channelled through commercial banks,” he said.
Meanwhile, the continuing crackdown on high prices by the government has brought business people who are resisting the reductions closer to jail, according to Minister without Portfolio Elliot Manyika.
Manyika said those resisting the government order would be bruised by the law.
“Any leader or any person across the board who obstructs the course of justice in the implementation of price stabilisation measures will be apprehended regardless of their status in society,” he said at a press briefing on Monday evening.
He also instructed parastatals to immediately reverse their rates and prices to their June 18 levels.
The parastatals include mobile phone service provider NetOne, fixed line operator TelOne and national airline Air Zimbabwe .
The government last week ordered the private sector to reduce prices by up to 50 per cent but people wondered why it was only the private sector that was ordered to do so, while parastatals were increasing their charges.