The payment of 40 percent local currency component to tobacco farmers is pushing up the parallel market exchange rate, which is currently pegged at between ZWL130- ZWL140 per US dollar, The Harare Post was informed.
A source within the Ministry of Finance and Economic Development said the tobacco marketing season which was now at its peak, had increased money supply.
“Tobacco marketing season has reached its peak and we are having average daily deliveries of 3 million kilogrammes. Those daily deliveries translate to ZWL300 million daily from the 40% quota received by farmers in local currency. This scenario is pushing up prices, which have been stable since 2020,” said the source.
He said farmers were converting their ZWL component to USD so that they could buy inputs which were cheaper in USD. He added that all transactions in the rural areas were USD-based, forcing farmers to sell their ZWL to get USD for rural transactions.
He said, “Before the tobacco marketing season started on 7 April 2021, the rate has been relatively stable, hovering around 1:120. However, exchange rate for hard cash has been stable at 1:100 and this is because farmers are not accessing cash from the banks.”
He said it was unfortunate that some manufacturers, who were not accessing foreign currency from the Auction System, were using the parallel market exchange rate.
“More RTGS are expected into the market when maize purchase starts. A total of ZWL32 billion will be injected into the economy between June and 30 August,” he said.
The source suggested that since tobacco was an export crop, which is paid entirely in USD, it would help much if farmer’s retention was increased from 60 to 80 percent. He argued that if the ZWL component is reduced, that would also reduce pressure on the parallel market.