Govt Will Not Rig Exchange Rate – Mthuli Ncube

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By Anna Chibamu

GOVERNMENT will not attempt to impose any auction rate different from the prevailing one on the market as doing so will undermine the auction system, Finance Minister Mthuli Ncube has said.

Ncube was responding to MPs in Parliament Wednesday after the legislators had called on the Treasury boss to review the current official fixed auction rate of US$1:83 ZW.

Opposition MPs argued the prevailing rate was prejudicing farmers due to the mismatch between it and the black market rate (USD1:120ZW) at the open market.

Ncube told Harare North MP Rusty Markham and Harare East MP Tendai Biti who had raised the issue that “government can only offer the auction rate which is 83.5 per US”.

“We cannot offer any other exchange rate. If we did that, then we will be undermining the auction system and we will be promoting these other markets for which we have no control over which also have shown to be quite disruptive,” he said.

The legislators reported to Deputy Speaker Tsitsi Gezi that tobacco farmers were losing at least 30% of their earnings due to the mismatch of the exchange rate on the market.

Said Markham, “When a farmer gets paid, when they get 60% or whatever percentage into his nostro account, as soon as his money goes on for the auction rate, we are talking of roughly 83:1 now.

“As soon as that farmer walks out of there and goes and buys inputs, these are charged at the illegal market rate at 120 dollars. That means the farmer, for next year, before he even picks up a hoe, he or she has lost 30%.”

Ncube however said government would stick to the auction rate and promote that auction system by making sure that anyone who deals with the central government uses that exchange rate.

Biti’s supplementary question related to the same.

“The economy and farmers are suffering serious prejudice due to the mismatch between the official fixed auction rate of 1:83 or 83:5 at the open market.

“Farmers will get for their retention a US dollar of 1:83 but their cost structure is indexed on the black market rate which is around 1:125, why do you not do the right thing Honourable Minister and accept the informal re-dollarisation that has taken place.

“For you to remain within your track, why do you not simply liberalize the exchange and let the Zimbabwean dollar find its mark on the open market instead of having the artificial controlled exchange rate of 1:83 which is prejudicing the market, farmers and the rest of the economy?”

According to the minister, the auction system is not fixed.

“The auction system only releases to the public as a communication point. The auction system is not rigged, fixed, or manipulated. The auction system represents the best expression in choice.

“You go there and you express whatever exchange rate you want. It is up to you.  If you want to buy United States dollar at 1:1000 it is up to you.

“We will actually sell to you to teach you a lesson.  You choose your exchange rate.  That is why when we publish the results, we show a range.”

Further argued Ncube, “Zimbabwean dollars or RTGS, whatever he is calling it, is stable, it is retaining value.  For the first time in three years, companies can plan. We cannot therefore adopt anything else that undermines that stability.

“We have to stick to the auction rate.  That is what has delivered order and stability.  The auction system is driven by free market forces because you can choose any exchange rate you want.  You cannot be freer than that.”