banking

Zimbabwe dollar risks collapse, warns business lobby

October 14, 2021

Zimbabwe’s leading industrialists have warned that the country’s currency is in danger of collapsing as businesses resort to United States dollar transactions.

The authorities have in recent weeks arrested scores of foreign traders accused of manipulating the volatile Zimbabwean dollar by trading on the black market.

On the streets, the currency changes hands for up to Z$200 per US dollar, while the official rate is pegged at Z$90.

In a letter to its members, the Confederation of Zimbabwe Industries (CZI) – the largest representative body for local business, said it had cautioned the government against clamping down on firms and traders.

“The greatest risk facing the economy right now is an inappropriate policy response to the rising parallel market premium,” CZI said about the widening gap between the official and black-market currency values.

“Clamping down on informal exchange trading in the absence of a viable formal market will have catastrophic consequences for the economy.”

The Zimbabwe dollar is in real peril,” the lobby group added.

“Well-considered policy measures must be implemented by the authorities aimed at bringing back confidence into the currency markets.”

President Emmerson Mnangagwa’s government is battling to stop another collapse of the Zimbabwean dollar, which was only resuscitated in 2019, two years after the fall of long-time ruler Robert Mugabe a year earlier.

The local currency was re-introduced at parity with the United States dollar, but it has plummeted in recent months because of a runaway parallel currency market and a shortage of locally made goods.

Finance minister Mthuli Ncube said the government was now moving to penalise companies and businesses that factored in parallel market rates when pricing goods and services.

“Businesses who disregard the law and continue to price their goods on the parallel market rates will have their licenses suspended,” Professor Ncube said in an advisory issued on Thursday.

Struggling local companies are resorting to discounting prices for those who can pay in US dollars to raise foreign currency for retooling.

The country has since last year been using a dual pricing system where businesses are allowed to sell goods and services in US dollars using the official exchange rate and local currency.

theeastafrican



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