Malawi forex crunch affect companies
By Nyasa Times
Published: September 22, 2010
The foreign exchange shortages have adversely affected the manufacturing sector as companies such as Bata Shoe say they cannot secure necessary raw materials. Malawi is currently experiencing severe shortage of fuel and foreign currency.
Managing Director of Bata Shoe Company, the producer and seller of shoes, George Mlenga told Zodiak radio that the forex crunch is affecting the company from purchasing raw materials from abroad as well as exporting the finished products.
“The forex issue has hit us badly. You know we are doing production and at times when we need to get raw materials it is becoming a challenge,” said the Bata boss.
Entrepreneurs say foreign currency is scarce in financial institutions, a similar problem the country faced around December last year. Reserve Bank of Malawi (RBM) resumed rationing of foreign currency from September 1 2010.
And published reports say financial services group, Nico Holdings Limited, has said it fears that the uncertainty surrounding the shortage of foreign currency will be a major challenge to their businesses in Malawi.
Finance Minister Ken Kandodo told parliament earlier this year when he was presenting the national budget that the forex shortage situation will improve “as the year progresses”
“I am very much aware of the challenges facing our business community. It is my hope and belief that as the year progresses, the foreign exchange situation will improve. In this regard, the Reserve Bank of Malawi has instituted measures -that will enable the country to rebuild the foreign exchange reserves position,” said the Finance Minister.
There is also diesel shortage in almost all service stations in the capital city Lilongwe, bringing business to a standstill.
Nyasa Times also interviewed some residents in the capital who said there pumps were dry and that motorists were reportedly continuing to abandon their motor vehicles at service stations hoping they would refuel once gasoline is delivered at the stations.
“I have searched for fuels today from one service station to another but pumps are all dry. At least some stations, there is short supply of petrol but diesel is unobtainable,” Sosten Mtunduwatha said.
The problems that Malawi is facing ranging from fuel shortages, the forex crunch, power blackouts and water scarcity are attributable to the Mutharika administration which has snobbish tastes for extravagant use of forex.
Nyasa Times earlier reported that Malawi’s forex problems occurred because the Government of Malawi, in June 2007 through the Reserve Bank of Malawi, lent the Zimbabwe Government about USD100 million.
The money was meant for the Zimbabwe Government to buy maize in Malawi, according to information on page 62 of the account for Reserve Bank of Malawi for the year ending 31 December, 2008.
The loan, guaranteed by the Malawi government on the basis of a personal understanding between President Bingu wa Mutharika and his close political pal President Robert Mugabe of Zimbabwe, was supposed to be repaid by December 31, 2009.
There has been no report that the money was repaid.
In addition, the Mutharika Government bought a presidential jet for about US$15.9million.
However, the government was not fully forthcoming on the transaction involving the jet, bought from Aero Toy Store in the United States of America. Specifically, the government has been very secretive regarding the vote used to purchase the plane.
The government also depleted forex following the blowing of £3 million on a fleet of 22 Mercedes Benz motor vehicles from Britain for the cabinet. According to The Sun newspaper of Britain, London-based Crown Agents Bank Ltd. is said to have brokered the deal.
Moreover, Mutharika has been the subject of criticism on extravagant expenditure, drawing the ire of the opposition when his government purchases a fleet of top-of-the-range Hummer vehicles for his motorcade. In the same splurge, he also bought buses to run his campaign, using one during the campaign in which he was the only passenger.
Labels: FOREX, GEORGE MLENGA, ZAMBIA BATA SHOE COMPANY PLC
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BoZ allays fears on Forex stability
By Chiwoyu Sinyangwe
Wed 28 Apr. 2010, 03:40 CAT
THE Bank of Zambia (BoZ) has said dumping of government securities by foreign portfolio investors does not pose a threat to the stability of the foreign exchange market because their position is almost insignificant.
There has been some fears that with yields on the government securities collapsing as BoZ reduces its Open Market Operations (OMO) and excess liquidity will result in insignificant demand for government paper and international portfolio investors are probably trying to exit Zambia as their local-currency fixed income positions mature.
According to some market analysts, this could place some pressure on the foreign exchange market in the immediate short term, or at least prevent the kwacha from appreciating against global currencies.
But BoZ head of public relations Kanguya Mayondi said the position of foreign portfolio investors in the government securities was not big enough to cause instability in the local foreign exchange market.
Mayondi said reduction in the holdings of government treasuries was a rational investment decision as investors search for better returns in competing financial assets and destinations following falling yield rates in Zambian treasury securities.
“However, given the presently small proportion of non-residents’ investment in government securities relative to amounts held prior to the financial crisis, the reduction in their securities holdings does not pose a significant threat to the stability of the foreign exchange market nor to the macroeconomic environment in general,” Mayondi said. “Nonetheless, the Bank will continue to closely monitor developments in this segment of the market and will take appropriate remedial action should this be deemed necessary.”
Mayondi observed that yield rates on Treasury Bills and Bonds had collapsed in recent months.
“The sharp fall in yield rates is a result of many factors, including high liquidity levels in the banking sector. As banks compete for investment in treasury securities, they exert a downward pressure on interest rates and this is what has been happening lately,” said Mayondi.
“The withdrawal of foreign investors from the domestic debt market is also driven by a number of factors, including global risk concerns and return considerations on their investments. Zambian treasuries have historically provided investors with a high return even at the height of the global financial crisis.”
Labels: BOZ, FOREX, KWACHA, OPEN MARKET OPERATIONS
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Dollarisation still best alternative
Sun, 17 Jan 2010 22:26:00 +0000
DEAR EDITOR - In response to an article published on your website saying that dollarisation was not working for Zimbabwe, please accept my small contribution. Sure enough the US dollar has its problems, but I personally feel that it is the only solution we have at the moment.
Your suggestion holds a lot of economic sense, but in Zimbabwe what counts most is political sense. As long as the Zimbabwean dollar is introduced concurrently with the US dollar, it is prone to abuse. You will see a parallel market emerging taking advantage of the difference in rates.
We all witnessed the misuse of the Zimbabwean dollar last year when those with access to the Reserve Bank of Zimbabwe looted all the forex in the street using the useless Zimbabwean dollar.
Maybe we should first put contingent plans to curtail abuse by the well-connected politically. Nothing has actually has been done to harness the run-away inflation?
Production is still very low in most sectors of production (agriculture, mining and industry), so there is no guarantee that our currency will not create more problems for us in as far as inflation is concerned. The ground work is still very raw.
T. Chivengwa
Zimbabwe
Labels: DOLLARISATION, FOREX
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Malawi urged to stop buying luxury goods, save foreign exchange
By Nyasa Times
Published: November 20, 2009
Malawians should stop importing luxuries such as cars and televisions to conserve foreign exchange in the southern African nation, the central bank said.
The country has a shortage of foreign currency caused by falling prices for tobacco, its biggest export, a decline in foreign portfolio investment and the global recession.
“We are in a crisis,” Reserve Bank of Malawi Governor Perks Ligoya said in remarks broadcast on Capital Radio, a closely held broadcaster, today. “In hard times like these, we cannot afford luxuries, we have little resources.”
The Malawian kwacha has weakened 1.6 percent to 142.9 against the dollar from the 140.6 it was set at for more than two years until Oct. 28. On the black market, the currency is trading at 190.
Malawi’s government has announced plans to conserve financial resources, including restricting travel abroad by all public officials to no more than six times a year.
–Bloomberg
Labels: BINGU WA MUTHARIKA, FOREX
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Malawi begs Mozambique to lend it fuel after being depleted of forex
By Nyasa Times
Published: November 12, 2009
The Malawi Government has been pressing the Mozambique Government in a bit to borrow fuel as Malawi has run out of foreign exchange, it has been learnt.
Malawi is facing a serious fuel shortage following the scarcity of foreign exchange. Fernando Couto, Chief Executive Officer of the Northern Development Corridor (CDN), which runs the Nacala port and rail system, says that Malawi asked Mozambique to borrow fuel.
“The Malawians have even asked us to lend them fuel”, Couto revealed, denying claims by Malawi authorities that the current shortage of fuel is due to congestion at the Mozambican ports of Nacala and Beira.
Reserve Bank of Malawi (RBM) governor Perks Ligoya (pictured) told a joint news conference with IMF in Lilongwe on Wednesday that, through government, there would be some adjustments in the local currency against other currencies to alleviate the forex problem.
“The movement of the exchange rate will be fixed with the flexibility within the band which would be put in place by the central bank like between MK135 to MK147 per US Dollar,” he said.
He therefore warned unscrupulous dealers of forex that they would be brought to book to face the law which attracts over three years in imprisonment with hard labour if found illegally dealing in forex.
Labels: FERNANDO COUTO, FOREX, FUEL, NORTHERN DEVELOPMENT CORRIDOR (MALAWI)
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Malawi begs Mozambique to lend it fuel after being depleted of forex
By Nyasa Times
Published: November 12, 2009
The Malawi Government has been pressing the Mozambique Government in a bit to borrow fuel as Malawi has run out of foreign exchange, it has been learnt.
Malawi is facing a serious fuel shortage following the scarcity of foreign exchange. Fernando Couto, Chief Executive Officer of the Northern Development Corridor (CDN), which runs the Nacala port and rail system, says that Malawi asked Mozambique to borrow fuel.
“The Malawians have even asked us to lend them fuel”, Couto revealed, denying claims by Malawi authorities that the current shortage of fuel is due to congestion at the Mozambican ports of Nacala and Beira.
Reserve Bank of Malawi (RBM) governor Perks Ligoya (pictured) told a joint news conference with IMF in Lilongwe on Wednesday that, through government, there would be some adjustments in the local currency against other currencies to alleviate the forex problem.
“The movement of the exchange rate will be fixed with the flexibility within the band which would be put in place by the central bank like between MK135 to MK147 per US Dollar,” he said.
He therefore warned unscrupulous dealers of forex that they would be brought to book to face the law which attracts over three years in imprisonment with hard labour if found illegally dealing in forex.
Labels: FOREX, NORTHERN DEVELOPMENT CORRIDOR (MALAWI)
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Forex analyst warns of kwacha decline
Written by Florence Bupe
Friday, September 04, 2009 5:08:02 PM
A FOREIGN exchange market analyst has urged caution on the prospects of the kwacha as there is likely to be an upturn in dollar demand during the last quarter of this year.
According to a foreign exchange alert released by Standard Chartered Bank titled ‘The great moderation in African foreign exchange’, an analysis conducted by Stanchart UK senior foreign exchange strategist, Robert Minikin, warned of a possible slump in copper prices, a situation which could impact on the performance of the kwacha, considering Zambia’s economic exposure to the copper market.
“Given the powerful surge in copper prices, it is perhaps unsurprising that the Zambian kwacha has traded with a firmer tone in recent months. We remain cautious on the unit’s near term prospects as there is a seasonal upturn in demand for US dollars in the fourth quarter, while our commodity team warns that copper could suffer a setback as prices are stretched a long way above the cost of production,” he warned.
He observed that the reopening of some commodity export markets and the improvement of other commodity prices had greatly helped in the recovery of currencies.
“Encouragingly, some commodity export markets have now reopened, such as that for diamonds, while some commodity prices are now substantially above the levels which seemed likely just a few months ago, notably copper, helping the Zambian kwacha,” he stated.
Minikin further indicated that the powerful foreign exchange cycles over the last five years were expected to give way to more orderly trading conditions.
Labels: FOREX, KWACHA, STANCHART
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Zim reintroduces forex bereaux
by
31/07/2009 00:00:00
THE Reserve Bank of Zimbabwe on Friday said it has allowed foreign exchange bureaus to resume full operations as part of reforms aimed at reviving the battered economy.
In a mid-year monetary policy review, RBZ governor Gideon Gono said the bureaus which have in the last seven years served as money transfer agencies for Zimbabweans working abroad, could now buy and sell foreign currency to the public.
In January, Zimbabwe lifted a ban on the use of foreign currency to stem hyperinflation that had rendered the Zimbabwe dollar almost worthless.
The move left Zimbabwe without an interbank market and reduced the central bank to a simple supervisory role as it lacked foreign currency reserves to be the banker of last resort.
"The adopted multi-currency system, together with the liberalisation of exchange restrictions on the current account means that the public is free to transact and deal in foreign currency," Gono said in the review published on Friday.
"This new development makes it possible for the extension of bureaux de change business to include selling of foreign exchange to individuals, using international cross-rates."
Gono said he supported plans to re-introduce Zimbabwe's own currency only when the local economy recovers.
Labels: FOREX, GIDEON GONO
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Fundanga explains cause of weakening kwacha
Written by Fridah Zinyama
Wednesday, March 11, 2009 5:02:19 PM
BANK of Zambia governor Dr Fundanga has said the weakness of the local currency is a consequence of increased risk aversion to emerging and developing economy financial assets.
According to Dr Fundanga, the supply of foreign exchange by foreign portfolio investors for the purchases of kwacha financial assets such as government securities and domestic company equities has significantly declined, with most non-residents preferring to liquidate their investments and externalising the foreign exchange.
“The consequence to this is the volatility in the exchange rate of the kwacha against other major currencies,” he pointed out.
The kwacha is currently trading at between K5, 625 and K5, 645 per US dollar.
Dr Fundanga explained that the response of the Bank of Zambia has been to significantly increase supply of foreign exchange to the market, in recognition of this supply shock as well as the global uncertainty in the prospects for commodity prices and the mining sector in particular.
“In addition, the financial sector exhibited an additional demand for kwacha liquidity related to the global financial crisis, which was reflected in persistent shortfalls in government securities tenders during the half last year,” he said.
Dr Fundanga said the central bank responded by rebalancing the use of its monetary policy instruments with a greater weight placed on foreign exchange sales.
“Associated with the exchange rate volatility is the pass-through effect of the depreciation of the kwacha against major currencies on domestic inflation,” he said. “A depreciation of the kwacha against major currencies tends to cause inflation to increase.”
Dr Fundanga explained that reflective of this principle, annual inflation increased to 16.6 per cent in December, 2008 from 14.2 per cent in September 2008.
“This outturn was above the 8.9 per cent inflation recorded in December, 2007 and the increase in inflation was in part explained by the pass through effects of the exchange rate of the kwacha against major currencies as the effects of the global financial and economic crises unfolded.
The country's inflation rate has since reduced to 14 per cent but there are fears that the volatile exchange rate might contribute to its increase again as Zambia is a net importer of goods.”
Labels: CALEB FUNDANGA, FOREX, INFLATION, KWACHA
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IMF observes pressure in foreign exchange market
Written by Chiwoyu Sinyangwe
Thursday, March 05, 2009 9:59:52 PM
PERSISTENT uncertainty about the global economic prospects and their impact on the domestic economy has resulted in intense pressure in the foreign exchange market, the recent IMF team to Zambia has observed.
And the IMF has predicted that the country’s economic growth is this year going to slow down on account of the global financial crisis.
According to a statement issued at the end of the visit by the IMF team to the country between February 18 and yesterday, mission chief for Zambia Francesco Caramazza stated that IMF was happy with the response of the Central Bank towards the foreign exchange market.
Caramazza stated that the exchange rate in the country would continue to be market-oriented and that since October last year, the kwacha had depreciated broadly in keeping with the changed fundamental determinants of the exchange rate.
“Persistent uncertainty about global economic prospects and their impact on the domestic economy, in a thin market with volatile expectations, has, at times, resulted in intense pressure in the foreign exchange market,” Caramazza stated. “The Bank of Zambia has responded appropriately to exchange market pressures by providing, when, necessary, foreign exchange to the market from reserves it has built up in recent years.”
The team also indicated that the IMF was ready to increase the lending portfolio to the country under the Poverty Reduction Growth Facility (PRGF) as a way to assist the local economy deal with the current effects of the economic crunch.
“To ease the adjustment to the external shock Zambia has experienced and support the Bank of Zambia’s ability to maintain orderly foreign exchange market condition, the IMF stands ready to provide substantial additional balance of payments support to PRGF arrangements,” according to the statement.
The mission team also announced that it had agreed with the government on structural measures for this year to complement the macroeconomic framework.
“The programme will continue to focus on improving public financial management, advancing financial sector development, and implementing polices to ensure an adequate and reliable supply of electricity,” the statement read.
And the IMF has observed that Zambia will this year record reduced economic growth as the copper mining sector had been the hardest hit by the current global economic crisis.
The IMF team however praised the policy response the government was making towards the expected decline in economic activity.
Labels: FOREX, GREAT DEPRESSION II, IMF
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Govt rules out controls on volatility in forex market
Written by Kabanda Chulu and Chiwoyu Sinyangwe
Monday, February 23, 2009 7:09:06 AM
FINANCE minister Dr Situmbeko Musokotwane has said the government has no plans to re-introduce controls to stop excessive volatility in the foreign exchange market.
And immediate past Economics Association of Zambia (EAZ) national secretary Chibamba Kanyama has warned that continued depreciation of the kwacha would destabilise the economy in general.
And BUK managing director Benjamin Katubiya has asked the Bank of Zambia (BoZ) to intervene in the local forex market which was mostly hurting local entrepreneurs because the local economy would only be developed by Zambians and not foreigners.
During a meeting with the private sector to discuss measures to address the exchange rate volatility on Friday, Dr Musokotwane said the supply of US dollars on the market was more than adequate and volatility could not be justified.
“Economic fundamentals are fairly alright, even the price of copper is quite good hence this volatility cannot be justified and we strongly believe that the supply of dollars is more than adequate,” Dr Musokotwane said.
“What we have is the best system and so far it has functioned well and we do not want to come under pressure and say let’s abandon this and try that because abandoning this system is no solution at all, all we need is to work together to ensure that that stability comes back to the market for it to work properly.”
He advised against panic buying by some stakeholders in the economy.
“These movements cannot be justified and this is because some of us are front loading or buying quantities much bigger than we need hence causing panic on the market,” Dr Musokotwane said.
BoZ governor Dr Caleb Fundanga said there was too much speculative behaviour and dollarisation by certain sectors of the economy.
“The system we have is the best and we are committed to ensure that it survives and forex inflows are still coming from the mines and non traditional exports so this volatility is because of speculative actions and also there is a tendency to demand payment in US dollars when selling local produce such as wheat and maize,” Dr Fundanga said.
And Kanyama said there was need for the government to restore economic confidence as a matter of urgency so that people do not irrationally speculate on currencies.
“Zambia is an import dependant country and any such unpredictable and steep changes in the exchange rates have the potential of negatively impacting on macro-economic stability of the country and because of the depreciation of the kwacha, Zambia will not enjoy the reduction in the price of oil on the global market. If anything, the Energy Regulation Board may soon hike the price of fuel to protect some margins of profit for oil marketing companies,” Kanyama said. “The fear now is that the depreciation may continue until maize supplies stabilise in June, donor inflows start and investors begin to respond to government securities.”
And in an interview last week to announce the completion of the new US $1.2 million [K6. 6 billion] spare parts and office premises along Kafue Road, Katubiya said the local economy was import oriented and that the current collapse of the kwacha against most convertible currencies would further exacerbate the problems local companies were facing which were stemming from the effects of the global financial crisis.
“Our business is import oriented. All these parts are imported from outside, so if we have any devaluation in the kwacha, customs duty goes up and the cost of landing these goods also goes up,” Katubiya said. “The ironic thing about the Zambian market is that it is not price sensitive whereas if a trader wants to increase prices, you have severe rejection from clients, they will just not buy your products. Just as BUK, last week we sat here for four days reducing the prices in order to arrest the falling sales and to try to encourage these clients to buy as they had been hit by the effects of the current global economic crunch.”
Labels: CALEB FUNDANGA, FOREX, SITUMBEKO MUSOKOTWANE
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Zambia’s Forex reserves under threat, says Sichinga
Written by Chiwoyu Sinyangwe
Thursday, February 19, 2009 7:44:24 AM
ZAMBIA’S foreign exchange (Forex) reserves remain under threat as long as the Central Bank continues to maintain an irresponsible monetary regime that does not regulate amounts of US dollars being externalised, business consultant Bob Sichinga has observed.
In an interview in the wake of a revelation by Citibank treasury market report that Zambia’s Forex reserves have declined from US $1.350 billion in December 2008 to the current level of US $1.157 billion due to the government's intervention in the exchange rate, Sichinga said there was need to review the country’s policy on 100 per cent externalisation of profits for all investors.
Sichinga, who described the current monetary policy in the country as “porous”, said most investors in the country were externalising beyond profits and at the expense of depleting the current Forex positions.
He explained that declining country Forex position had further been compounded by reduced earnings from copper sales as the international price copper continue to tumble and also increased capital flight as investors remove their US dollars from local markets to less riskier economies.
“It can’t be business as usual in times like this when the business environment globally is unusual, and that is why I have been advocating for an economic task force in periods like this when we have this crunch. The Bank of Zambia (BoZ) can’t continue to have a very porous Forex regime which is irresponsibly managed,” Sichinga said.
“BoZ keeps telling us that they will not interfere with the ( Forex) market, fine. Nobody is asking them to do so but all we are saying is that the markets should be regulated. It should not be free for all…even in developed economies like the United States and United Kingdom, you can’t just take out cash like that.”
Sichinga also said even investments incentives provided for under the Zambia Development Agency (ZDA) were not helping matters because they depended so much on pledges without a strong mechanism to keep a tab on how much money was actually brought into the country.
“Foreign investors would come in the country and promise to come and invest, say, US $ 5 million but may just bring US $1 million and the remainder is borrowed from the local market but when it comes to externalising, there is no control of how much they will send out. We need to review whether the practice of 100 per cent externalisation of profits by investors has actually worked to the benefit of the local economy or not. It is my considered submission that it hasn’t,” said Sichinga.
“So, in the long run, it is the money (Forex) from our cooperating partners which they will externalise. I am concerned because even big companies like KCM don’t declare what their earnings are vis a vis what they were externalising, and BoZ says it is okay! I don’t understand that kind of economics. So, BoZ needs to give us data on how much money is coming into the country through investments compared with what is being externalised on a quarterly basis. Even some Zambians, especially of Asian origin and some indigenous people, are very active in flying Forex to Western markets.”
Labels: ECONOMY, FOREX, KWACHA, ROBERT SICHINGA
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Where is the forex coming from PM?
SuperT — Opinion
Wed, 11 Feb 2009 19:47:00 +0000
DEAR EDITOR — Just out of curiosity I would like to know whether the commitment to pay civil servants in foreign currency is a government commitment or personal one for the newly appointed Prime Minister, Morgan Tsvangirai.
I believe that the inclusive government has not been fully constituted yet as ministers have yet to be sworn in on Friday. I also happen to know that Cabinet decisions are by consensus and thus far there has been no inclusive government meeting.
I find it very strange that the Prime Minister has made such an announcement even before the prospective government has met. I believe there is something amiss here.
Also from where is the money coming to pay all civil servants in foreign currency? We all know Zimbabwe is financially crippled at the moment. Madzishamwari adira mari here nhai VaPrime Minister? (Have our friends availed the funds already Prime Minister?).
I hope this is not grandstanding on the part of the Prime Minister.
If the Prime Minister's statement does not represent a collective government decision then we are heading for interesting times ahead.
Ndatenda/ Siyabonga/Thank you.
SuperT
Labels: FOREX, MORGAN TSVANGIRAI
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Dollarise economy completely: ZNCC
New Ziana.
THE Zimbabwe National Chamber of Commerce said last week the economy should be completely dollarised to improve operations of industry.
ZNCC president Mr Obert Sibanda said the immediate measure required to resuscitate the industry was to grant all companies licences to trade in foreign currency.
"We have to accept the economy has been dollarised and all companies should be registered to trade in hard currency," he said.
It was important, he noted, for the country to adopt holistic approaches for the industry to prosper.
"The revitalisation of the economy in 2009 rests on concrete solutions that must be created by all stakeholders," he said.
"We no longer need piecemeal solutions," he added.
Mr Sibanda said industries had been operating below capacity and faced shortages of raw material and foreign currency.
The Reserve Bank of Zimbabwe last year partially dollarised the economy, granting over 1 000 firms licences to trade in foreign currency.
The economy has, however, illegally fully dollarised with almost all sectors now charging in foreign currency.
"Stakeholders need to engage and stop the blame game if 2009 is to be a better year for business," he said.
Confederation of Zimbabwe Industries president Mr Kumbirayi Katsande earlier said a solution to the current political impasse would greatly aid business.
"The performance of industries this year will be determined by the finality of a political settlement between the three major political parties," he said.
"The formation of an inclusive Government will unlock all sectors as the current political impasse has impacted heavily on the manufacturing sector," he added.
Western-imposed sanctions have seen most industries reeling from shortages of inputs and foreign currency. The scarcity of hard currency saw the unavailability of fuel, imported raw material and spares continuing to worsen last year.
His comments come after Industry and International Trade Minister Mr Obert Mpofu said early this week that requests by local companies to pay workers in foreign currency were reasonable although appropriate measures need to be taken to ensure sustained inflow of hard currency.
"The idea of paying people in foreign currency is not unreasonable," he said.
"But there is need for all stakeholders to find an appropriate mechanism of going about it," he added.
Mr Mpofu said the Government should ensure that there was a stable inflow of foreign currency into the country so that it could be able to pay civil servants in forex.
Meanwhile, partial dollarisation of the economy is reported to be crippling the operations of small and medium enterprises most of whom are now finding the going very tough.
Officials in the sector said on Wednesday that it had become very expensive for SMEs to buy materials required for their various production processes as they were being charged in foreign currency.
A senior official from the Small Enterprises Development Corporation confirmed there was little activity at most SME premises.
"The SMEs are not trading because of the dollarisation of the economy," said the official.
"At the moment, there is very little activity."
Some officials involved in lending to the sector said there was virtually no business as no one was coming to borrow the local currency.
"There is no point in the SMEs coming to the banks to borrow large sums of money in local currency when you find that they are being charged virtually everything needed in the production process in foreign currency," said a bank official who requested anonymity.
Sedco has also indicated that it was facing difficulties as it survives on funds from the fiscus. — New Ziana.
Labels: FOREX, SMEs
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Forex fees: Cabinet to decide tomorrow
Herald Reporter
CABINET is tomorrow expected to decide whether or not schools should be allowed to charge fees in foreign currency after over 95 percent of schools applied to charge fees for the first term of 2009 in hard currency.
The Ministry of Education, Sport and Culture says it had no option, but to seek Cabinet guidance after almost every school submitted fees applications in foreign currency.
Parents and guardians, many of whom are paid in Zimbabwe dollars, were in a dilemma after the majority of schools applied to charge fees in foreign currency, the Secretary for Education, Sport and Education, Dr Stephen Mahere, said.
He said almost all fees applications from schools were in US dollars and rands and the ministry was awaiting a Cabinet decision on whether or not to allow fees to be paid in foreign currency.
"The ministry cannot approve the fees in foreign currency and is awaiting a Cabinet decision on the matter. We are still to forward the applications to the National Incomes and Pricing Commission for approval as most of the fees proposals submitted by schools are in foreign currency," he said.
Dr Mahere said the decision on whether or not to charge fees in US dollars will then make it possible for his ministry to forward the applications to the NIPC for determination.
He said it was imperative to reach a decision on school fees soon to give parents and guardians enough time to plan and prepare for the opening of the first term.
The first term will now commence on January 27, 2009 after Government postponed the opening by two weeks to allow the marking of last year’s Ordinary and Advanced Level examinations.
Two weeks ago, the Ministry of Education, Sport and Culture invited schools to submit applications for fees and levy adjustments for onward transmission to the NIPC for determination.
Some schools have since sent circulars to parents and guardians advising them of their plans to charge fees in foreign currency with effect from term one.
They are arguing that all school provisions, goods, food and fuel are being sold in foreign currency.
But some of the fees demanded by the schools have been described as unrealistic given that most workers are paid in Zimbabwe dollars.
Schools such as Chisipite High and Westridge Primary in Harare, Falcon College in Esigodini and Centenary in Bulawayo have proposed fees above US$1 000.
Others have sent circulars to parents and guardians demanding levies in fuel coupons.
Parents and guardians who spoke to The Herald, however, urged the Government to approve only realistic amounts if the schools get the green light to charge in foreign currency.
Labels: FOREX, ZIMBABWE
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Comprehensive financial package on the cards: govt
Ralph Mutema
Mon, 12 Jan 2009 03:03:00 +0000
THE Government of Zimbabwe will soon receive a massive injection of cash from “friendly countries” which will offset the current economic problems being faced by the country, according to sources in the ruling Zanu PF party.
The Permanent Secretary in the Ministry of Information and Publicity and Presidential Spokesman, George Charamba, made the revelation over the weekend.
He said the financial package will be a huge boost needed for the revival of the productive sectors of the economy and will be a sanctions-busting initiative.
“Clearly, the tables are turning and it won’t be long before we get a massive economic package from friendly countries to revitalise the economy,” Charamba told a local paper over the weekend.
Between US$5 billion and US$10 billion is needed to revive the Zimbabwean economy, according to economic analysts.
Charamba did not, however, reveal who these “friendly countries” are, but vowed that the financial package was “likely to stimulate rapid growth in the economy by bringing back industry, agriculture and mining to gear once more, creating massive employment and making food available in shops”, according to Sunday News.
Zimbabwe Humanitarian and Development Assistance Fund (ZHDAF)
However, Sadc on Thursday launched the Zimbabwe Humanitarian and Development Assistance Fund (ZHDAF) in Zimbabwe’s capital, Harare.
Dr Tomas Agushto Salamao, the Sadc Executive Secretary launched the initiative saying that this fund is not a parallel process to other humanitarian funds adding that the initiative is different from that of the United Nations and the European Union which are based on relief.
Dr Salamao said the Sadc initiative was divorced from current negotiations on the formation of the all inclusive Government by the ruling Zanu PF party and the two formations of the Movement for Democratic Change.
"A ruling was made for Sadc to provide humanitarian assistance to Zimbabwe and its people,” he said.
“There is no way the region can ignore Zimbabwe because of the impasse, so we will assist with agricultural inputs and the fight against the cholera outbreak," he added.
Dr Salamao said the Fund was aimed at helping the Zimbabwean people and communal farmers.
"The launch also coincided with the meeting to ensure that the distribution of inputs, that is, seed and fertilizers, is non-partisan and benefits all the people — especially communal farmers.”
He added that the initiative predicated on ‘regional solidarity’ and was a regional initiative meant to benefit the whole bloc.
"This is regional solidarity. When you are facing difficulties, you have to count on the solidarity of your brothers. We cannot fail in assisting Zimbabwe, that's the critical and most important thing," said Salamao.
Labels: ECONOMY, FOREX, SANCTIONS, TOMAZ SALOMAO
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Forex dealers hit hard times
Herald Reporter
THE introduction of the
Foreign Exchange Licensed Warehouses and Retail Shops facility authorising businesses to sell goods and services in foreign currency, and the mushrooming of other unlicensed outlets has dealt a near-death blow to the illegal foreign currency market as fewer people are changing their hard currency into Zimbabwe dollars.
Since almost all goods and services can now be paid for in hard currency, demand for Zimbabwe dollars on the illegal parallel market has fallen drastically, a development that has seen illegal foreign currency dealings almost drying up.
At the same time, the tightening-up of cash allocated to banks by the Reserve Bank of Zimbabwe has made it virtually impossible to "burn" money, that is to arbitrage between cash and cheque rates.
A survey by The Herald this week revealed a significant drop in demand for the local unit as very few shops and traders were still selling products in Zimdollars.
RBZ awarded over 1 000 shops and wholesalers countrywide licences to trade in hard currency, but other traders have since followed suit notwithstanding that they did not have central bank authority to do so.
This has seen the appetite for the Zimdollar going down as people use their free funds to pay for goods and services.
This has had an adverse effect on illegal foreign currency dealers, whose business had been thriving as people used to change their hard currency to buy goods and services in Zimbabwe dollars.
Although there is an ongoing police operation targeting illegal foreign currency dealers in and around the central business district, it is mainly the growing dollarisation of the economy that has seen the lucrative money-changing business losing its glitter.
Ximex Mall, Fourth Street, Roadport in the city, Machipisa Shopping Centre in Highfield and Tichagarika Shopping Centre in Glen View used to be hives of activity with illegal foreign currency dealers conducting brisk business.
An illegal foreign currency dealer, Ms Gertrude Mahachi, operating at the Ximex Mall, said business had been going down since the opening of the first foreign currency shops.
"Although there have been police raids here and there, it is a fact fewer and fewer people want to change their forex into Zimbabwe dollars. This has adversely affected our once lucrative business," said Ms Mahachi.
Another dealer, Mr Michael Mapuranga, said most of his colleagues were no longer reporting for "duty" owing to a sharp drop in the demand for local currency.
"The problem is that there are limited places where you can use local currency. It is possible for one to go for a month without coming across a situation requiring the use of local currency, especially in the case of motorists," said Mr Mapuranga.
Basic commodities like bread, cooking oil, sugar and maize-meal are mostly available in foreign currency.
Even commuter omnibus operators now accept foreign currency, leaving those with free funds with no choice but to hold on to their hard currency.
Mr Lawrence Chipashu of Dzivaresekwa observed there was no longer any pressing need for people to change their greenbacks, rands, pula or pounds into local currency since the economy was now virtually dollarised.
Labels: COLOUR REVOLUTIONS, FOREX, INFLATION
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Malawi still in forex scarcity
Nyasa Times
27 December, 2008 04:35:00
Malawi continues to face an acute shortage of foreign currency, Nyasa Times has learnt commercial banks and money exchange bureaues.
A commercial bank manager told Nyasa Times that is US Dollar and British Pound liquidity shortage for local banks.
Reserve Bank of Malawi (RBM) recently announced the introduction of an electronic system for tracking export proceeds known as the Foreign Exchange Statistical Database System (FESDS) to help amass foreign exchange.
In a statement issued by the central bank, it said the system which was introduced October 27 will facilitate speedy data capture and interchange between exporters, banks, Malawi Revenue Authority (MRA) and the central bank.
"Exchange Control (Forex Bureaux and Foreign Exchange Fixing Sessions regulations, 1994 issued under the Exchange Control Act (Cap. 45:01), 1984 requires that export proceeds be repatriated to Malawi. The proceeds are to be received in Malawi within 180 days of exportation,” RBM deputy governor Mary Nkosi said.
“Accordingly, exporters are required to advise their customers to quote the CD1 form unique reference number when remitting export proceeds to enable ADBs identify the proceeds with a particular CD1 form for purposes of reconciliation," the deputy central bank governor said in the statement.
Bank officials said the introduction of the new system followed the shortage of foreign currency but the situation remains “dire”.
Labels: FOREX, MALAWI
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BoZ to continue monitoring foreign exchange market
Written by Joan Chirwa
Monday, December 22, 2008 8:44:53 AM
THE Bank of Zambia (BoZ) will continue to closely monitor developments in the foreign exchange market and participate in circumstances that threaten its orderly performance, bank governor Dr Caleb Fundanga has stated.
And the local currency on Friday firmed further to trade between K4,800 and K4,880 per US dollar amidst much volatility in trading on the back of increased supply flows in the market with little corporate demand seen.
In response to a press query, Dr Fundanga indicated that although the Bank of Zambia did not issue predictions of the levels of exchange rate as they were dictated by a host of factors, particularly market forces, the Central Bank would continue to monitor the situation and participate where necessary.
“Our exchange rate is determined by the market and the Bank's role is limited to addressing volatility rather than targeting an exchange rate level,” Dr Fundanga stated.
He further stated that the Central Bank would not tolerate the issue of foreign currency quoting and invoicing of goods and services within Zambia.
“As you may perhaps already know, Zambia is a small but open economy. The reasons for pursuing an open economy policy are actually meant for the country to benefit from unimpeded access to international trade and transfer of technology, both of which are critical for development,” Dr Fundanga stated. “However, this policy does not, or should not, in any way be construed to mean that dollarisation becomes an accepted norm governing local business transactions. We strongly believe that our inflation rate, though rising in recent months, is not at levels that would justify dollarisation. We are fully aware that the recent depreciation of the kwacha may have been precipitated by the rebirth of this practice. Doing so will perpetuate the instability of the local currency.”
A couple of weeks ago, financial market experts warned that the local currency faced further pressure from service providers who were now quoting prices in US dollar.
The experts indicated that increased dollarisation of goods and services was more than likely to further weaken the kwacha's performance against major convertible currencies, giving an example of the Democratic Republic of Congo (DRC)'s Congolese franc that had been overshadowed by the US dollar.
And Dr Fundanga advised businesses in Zambia to desist from quoting or invoicing in foreign currency.
“Let me be quick to state here that, as a way forward, we intend to strengthen the law regarding this issue in order to protect this economy,” stated Dr Fundanga.
And the Citibank market update stated that corporate were on hand last Friday to convert dollars to meet tax obligations and year end conversions at higher exchange rates, necessitating the kwacha's appreciation.
“With the continued steady supply of dollars, the kwacha is likely to continue to be bullish into year end, with bouts of volatility imminent on account of mismatched flows,” stated Citibank.
Labels: BOZ, FOREX
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