The banning of foreign currency dealers is not the panacea for the country’s financial problems, which have seen parallel market exchange rates soar to ZWL 350 against US$1, analysts have said.
Speaking to the Review & Mail in separate interviews, analysts said the solution lied in the fixing of the system which was not working.
The Reserve Bank of Zimbabwe (RBZ) recently suspended MetBank and Rolink Finance from dealing in foreign currency for breaching the exchange control regulations, with the latter being fined US$120,000 for the breaches, which the central bank did not disclose.
The Central Bank also shut down Simbisa Holdings’ InnBucks platform, for allegedly failing to apply for approval to offer the forex-based transaction service.
The Innbucks platform, which used Simbisa group’s food outlets Bakers Inn, Pizza Inn and Chicken Inn, had received massive buy-in from customers because of its convenience and wide footprints across the country.
Labour and Economic Development Institute of Zimbabwe (LEDRIZ) Chief Economist, Prosper Chitambara said what was driving the depreciation of the local currency on the black market was failing to supply.
This, he said was leading most people who needed foreign currency to seek recourse on the parallel market.
“A More market led exchange rate determination mechanism process will help to engender more confidence and also address the widening black market premium. We need to ensure that we further liberalize the exchange rate system as a way of ensuring greater interplay of market, demand and supply,” he said.
Another economist, Victor Boroma said there was no way the banning of a few banks and money transfer agencies would impact on the economy as others would still provide the service.
“There are other banks and money transfer agencies that can be used. It only boggles the mind how an unlicensed firm can operate a money transfer service for six months when RBZ is there. Something amiss happened,” he said.
Boroma said it was never government’s role to allocate foreign currency in an economy.
“A market determined exchange rate is what ensures market equilibrium of forex demand and supply. Government role is limited to regulation, policy and bank supervision,” he said.
He said dollarization of the economy would only address inflation, adding that there was no way the country could fully dollarize when the government wanted the preserve to print money and fund out of budget programs or budget overruns.
Renowned Economist and former Coordinator General in Reserve Bank of Zimbabwe (RBZ) Monetary Policy Committee, Eddie Cross weighed in saying although both Innbucks and Metbank were violating the conditions of their license to operate, banning the financial institutions was not the solution.
He said this would not help resolve the current foreign exchange challenges, especially on addressing the widening gap between the parallel market rate and the auction rate which has led to price hikes.
“I do not think it is the solution. Many are taking advantage of the arbitrage opportunities that arise from the distortions in the exchange rate. We need to fix the system itself which is simply not working, he said.
He, however, noted that dollarization was not the panacea to the economic challenges beveling the country.
“We have no intention of dollarizing and indeed, this is not the solution. The solution is to adopt the local currency as the sole means of exchange and to trade all foreign exchange that comes into the system on an open market run by the Banks,” he said.
In February, the Financial Intelligence Unit (FIU) of the RBZ closed the accounts of Ceribrian TIA Transervet, Powerspeed Investment Private (Electrosales), Halsted Brothers and Enbee Store citing “unusual activity on the accounts”.
“As we carry out further investigations on possible money laundering relating to the funds, you are directed to freeze the account with immediate effect and you shall not process any withdrawals or transfers from the accounts, unless with the specific approval of the Unit. You should however, allow deposits or other flows into the account.
Government moved in to regulate foreign exchange transactions, gazetting Statutory Instrument (SI) 127 of 2021 which empowers the RBZ to punish those deemed to be abusing auction system.