Harare – Amid fresh allegations of money printing in Zimbabwe and a bullish black market, the country’s formal market has been hit by foreign currency shortages, ENN reports. In a bid to protect his new currency from a black market battering, Zimbabwe Finance Minister Mthuli Ncube outlawed the use of the United States dollar and other foreign currencies in local transactions effective 24 June 2019.
Contrary to financial discipline and economic recovery assurances given to citizens by Mthuli Ncube and his monetary authorities, the IMF’s latest report on the country’s progress in implementing the Staff Monitored Programme (SMP) registered concerns over the growth in reserve money in the form of bank balances with RBZ, RTGS balances and fiat money in circulation.
This growth became more pronounced after January 2019, aligning to the time after liberalisation of the exchange rate by the Reserve Bank of Zimbabwe. Zimbabwe liberalised its bond note to US dollar exchange rate on 20 February 2019 after the surrogate currency endured 27 months trading at par with the US dollar. According to the IMF, Zimbabwe now has a 15% chance of meeting the 2019 SMP targets by December 2019.
IMF is also recommending Government to let businesses carry their foreign currency legacy debts as part of their profit risk, against the ring-fencing of legacy debts initially adopted by the RBZ. The proposed approach will suffocate already struggling businesses and relieve the Government. This would be prejudicial considering that monetary policies that triggered this currency crisis came from the Government itself.
After enduring a hyper inflationary environment with record breaking annual inflation rates of 89.7 sextillion percent in 2008, the value of the Zimbabwe dollar decimated, leading to the adoption of a multi-currency system in 2009. Zimbabwe has one of the highest inflation rates in the world, and with a managed bank exchange rate, foreign currency availability to formal organisations remains elusive as most registered bureau de change and banks are dry, ENN Zimbabwe correspondent Carol Mvundura has established. In the face of foreign currency shortages on formal markets, a running exchange rate on the black market, a hyper-inflationary environment and persistent energy challenges, local businesses have panicked and are engaging Government officials at multiple levels in a bid to contain this unfolding national crisis. Unfortunately for Zimbabwean businesses, with the above obstacles, the die is cast.