This is according to leading economist John Robertson, who spoke as the Reserve Bank of Zimbabwe (RBZ) begins resorting to social media snooping and close monitoring of mobile money services — leading to arrests of ordinary people and company executives accused of fuelling the foreign currency underworld.
But, said Robinson, the government must sort itself out and begin to fix its own economy.
“The first step, yet to be taken successfully, is to win back respect for the Zimbabwe dollar. It cannot be taken seriously while its highest note value is measured in US cents or fractions of US dollar values,” he said.
The local dollar on the official market is pegged at ZW$87 against the US dollar, but on the parallel (black) market), it trades at ZW$170 against the US currency.
In June last year, the government introduced a weekly foreign currency auction system from which companies could buy forex at the official rate instead of turning to the parallel market.
However, the facility has since been abused and only companies with close links to the political elite have access to foreign currency, pushing disadvantaged people towards the black market.
Culprits identified by the RBZ’s Financial Intelligence Unit buy foreign currency at the official rate but price their goods and services using the black-market rate. In other words, something that should cost US$1 or ZW$87 retails at ZW$170 or more. Others simply get the forex at official rates and sell it on the black market at a premium and wait for another supply cycle.
According to RBZ governor John Mangudya, at least US$500m is now circulating outside the formal banking channels which is double what is in the mainstream. As such, the black market is more fluid.
Robertson said that is one area the government should deal with.
“All foreign exchange inflows are supposed to come into the country through banking channels and from the banks to the Reserve Bank at a given exchange rate in exchange for local dollars.
“Then, when an importer makes a valid request for foreign exchange, the amount required is supposed to be supplied by the Reserve Bank at the same exchange rate, minus a one half of 1% commission. All this should be brought into force by government regulations and adhered to strictly.
“Instead, the government permits the set of distortions that permit 100%-plus commissions to generate vast tax-free profits for privileged beneficiaries while claiming to be dealing with the problem.” he said.
Robertson added that the prevailing situation in Zimbabwe benefits a few elitists and it comes down to corruption.
“The black market’s tolerated existence is the real problem. If it were overcome, the so-called auction would not be needed, but the careful management of foreign exchange releases into productive enterprises would need to be controlled fairly and honestly, as it was for many decades going back to early Rhodesian days.
“Technically, we are not running an auction as the seller cannot set a reserve price or withdraw an offering to the sale process and a bidder offering an out-of-line price will see the bid disqualified. A liberalised exchange rate would have to be defined as a market-related exchange rate, which would have to be exempt from the deliberately contrived pressures that could accentuate imbalances or scarcities to force up artificial premiums or profit margins,” added Robertson. – Timeslive