Zimbabwe Central Bank Chief Plans Crackdown On Gold-Backed Currency Saboteurs

Zimbabwe’s central bank vowed to “double efforts” against currency saboteurs it blames for fanning the decline of the nation’s bullion-backed unit on the parallel market.

The ZiG, short for Zimbabwe Gold, is being quoted at between 16 and 26 to the dollar on the parallel market, according to ZimPriceCheck.com, a website that tracks both official and unofficial exchange rates. It’s trading at 13.94 per dollar on the official market, according to data on the central bank’s website on Thursday.

The discrepancy is because of “some unscrupulous traders and individuals allegedly quoting exorbitant implied exchange rates when selling goods and services in ZiG,” Governor John Mushayavanhu said in an emailed response to Bloomberg’s questions. “It is, however, critical to note that parallel market exchange rates in a dual economy should not be taken as a reflection of the true value of the exchange rate.”

The latest currency turmoil coincides with increased demand for dollars, which has helped revive parallel market activity.

Trade on the unofficial market slowed down soon after the ZiG’s April 8 adoption because of a nationwide blitz by the financial intelligence unit and police, in which some street currency dealers were arrested while others abandoned popular corners in the city centers to conduct transactions with known clients on Meta Inc’s messaging platform WhatsApp.

The Reserve Bank of Zimbabwe and the financial intelligence unit will “double their efforts toward enforcement of the country’s foreign exchange and currency regulations,” said Mushayavanhu. The central bank will also closely monitor developments on the parallel market “with a view to mitigate against extreme exchange rate distortions,” he said.

Zimbabweans have used US dollars to pay for everyday living costs, including transport, medicines and food, since 2009, when the national currency was scrapped after a failed land-reform policy set off a hyperinflation spiral that wiped out their savings. The ZiG is Zimbabwe’s sixth attempt at establishing a functional local medium of exchange in 15 years.

The current rush to hold US dollars is largely speculative and stems from “the country’s unfortunate past episodes with local currencies,” Mushayavanhu said. The central bank is committed to policy certainty and stronger market guidance as well as restoring its credibility as the chief underwriter of the local currency, he said.

The ZiG weakened for an 11th day on Thursday, according to central bank data, it’s longest losing streak since it was adopted.

Other Highlights:

• Central bank will continue to intervene in the foreign-exchange market and plans to implement a multi-dimensional strategy anchored by tight monetary policy and regular well-calculated injections to meet demand for dollars.
• The southern African nation’s foreign currency receipts increased by almost 10% in the first half of this year, compared with the same period last year, driven by strong performance in gold and diaspora remittances.
• A current-account surplus is expected.

Source:norvanreports.com