Taskforce to investigate forex leakages

Zimbabwean economists said on Tuesday that the formation of a government taskforce to address foreign currency shortages would not resolve the current economic crisis, and authorities should instead focus on trying to raise the hard currency the country needed. In a bid to improve foreign currency inflows into the state's coffers, the government formed a special taskforce of nine cabinet members last week. The government has blamed the business sector for failing to declare their foreign currency earnings, thereby fuelling the thriving parallel foreign exchange market and depriving critical industries, such as the energy sector, of much-needed hard cash to import fuel and power. According to the official Herald newspaper, the taskforce is expected to work out tighter mechanisms for remitting foreign currency to the Reserve Bank of Zimbabwe, compile a database of all the major exporting companies in Zimbabwe, and investigate companies accused of offloading foreign currency in the parallel market. But economic analysts told IRIN the move was misdirected, noting previous unsuccessful attempts by the authorities to police the country's exporters and importers. "It is very difficult to expect a positive outcome from this taskforce, especially since the government has not provided any incentive which would encourage businesses to openly declare their foreign currency earnings. The reports of businesses dumping foreign currency onto the black market is not surprising, given the overvalued Zimbabwe dollar. The government's decision to give individuals Zim $824 [to the US dollar], instead of the Zim $6,000 that is being charged on the black market, has only made an already bad situation even worse," Dennis Nikisi, director of the Graduate School of Management at the University of Zimbabwe, told IRIN. While it was necessary to minimise foreign currency leakages, the government should also turn its attention to the ailing industrial sector, Nikisi added. "The government's concerns [over forex mismanagement] are legitimate, but it is necessary to note that some of the top foreign currency earning industries have either shut down, or have reported record low productivity levels. So, while there may be hard currency in circulation, it is negligible. What is needed is a major injection of foreign capital to strengthen the capacity of the production sector," he explained. Tobacco, the country's major foreign currency earner, this year recorded the lowest volume sold in nearly 25 years. Economic analyst Tony Hawkins said: "What is needed is an exchange rate that reflects the reality of the current situation. The lack of foreign exchange has dramatically pushed up operational costs for companies, negatively affecting their profit margins. A better exchange, hopefully, will encourage business exporters to use the official foreign exchange market." In an attempt to stem foreign currency leakages, the government has in the past called on the Reserve Bank to engage audit firms to carry out pre- and post-shipment inspections of Zimbabwe's exports and imports.