Browsing: Political Economy

This shortage of hard currency implies that those businesses that rely on foreign exchange have often had to source it from the parallel market, where it is easily available relative to the formal market.

To mitigate the inflationary pressures caused by businesses looking for foreign exchange on the parallel market and passing on the effect of higher exchange rates to consumers in the form of higher prices, the central bank instituted the foreign currency auction system, which allocates foreign exchange to importers.

This foreign exchange shortage affects all businesses across the economic spectrum and is not limited to retailers only. Manufacturing companies import raw materials and spares. They have recently experienced viability challenges from charging prices in local currency.