Cash shortages bolstering parallel markets

ONE cannot say “official parallel rate”. After all, parallel markets are classified as such because of their lack of regulatory acknowledgement. Since the inception of bond notes, through voice and literature the Reserve Bank of Zimbabwe had never affirmed parallel rates to the US dollar. To the central bank’s assuagement, the parallel exchange rate had been formally negligible for some time.

Recently, however, pressure has intensified and the central bank itself has begun to allude to a more prominent parallel market, one, which threatens the 1:1 parity between the greenback and the nation’s surrogate denomination.

RBZ governor Dr John Mangudya recently acknowledged the premium charged on hard cash, noting that the difference between bank balances and hard cash will only push up these premiums.

A snap survey by The Herald Business around the Harare central business district show dealers are charging premiums of 8 percent bond to US dollar, 30 percent bank transfer to cash (bond notes), 35 percent bank transfer for cash (USD).

Hard cash exchange rates are 11 percent bond note to South African rand, and 12 percent USD to SA rand.

The premiums were once deterred by sufficient foreign currency reserves, albeit it in a priority list form. More recently, another nostro facility arranged by the RBZ is expected to ease premiums for hard cash.

But perhaps more effecting had been the commendable market empathy for the central bank. Market agents volunteered a social contract with the RBZ to conduct business on the understanding that bond notes were at parity with the USD. Hence, many formal retailers did not have multiple pricing structures.

This empathy has in recent weeks been increasingly tested as market agents are being forced to source hard cash on parallel market where there are premiums. The question now is, how long can the central bank continue to signal the enforcement of the formal 1:1 parity rate?

For the formal market agents still abiding to the social contract with the central bank, official banking platforms have become frustrating by continually disappointing in their availability and transactionary efficiency.