Reserve Bank of Zimbabwe (RBZ) Governor, Dr John Mangudya has
cleared the air on a number of issues surrounding the abolition of the
multi-currency system, among them clarifying that recipients of diaspora
remittances and other foreign currency payments can still withdraw their money
in hard currency.
Speaking in an interview, Dr Mangudya said non-governmental
organisations, embassies and other foreign organisations, will not be affected
and will continue paying salaries in foreign currency.
This is great news, it is a great comfort to all those who will
send their loved ones forex to know they will get the cash in forex too. It is
important to remind the recipients to insist on being paid in forex and not the
local currency.
What the Governor did not say is that people will be allowed to
trade their foreign currency freely. The usual thing is that all forex should
be bought and sold through approved dealers who will buy at the official
exchange which are way below the black-market rate. The ordinary people are
then forced to sell their forex at give-away rate but will never buy any forex
at the same official rate. The ruling elite will hoover the forex at the
official rate and sell it on the black-market using their runners.
If the ruling elite’s runner is arrested for black-market
trading; he or she will be released within hours. If an ordinary person is
arrested for selling or buying forex on the black market they are in serious
trouble! It is no secret that the ruling elite have made huge profits
controlling the forex black market in the past. They must be singing “The good
times are back again!”
Dr Mangudya also allayed fears of shortage of goods in shops as
the interbank market will supply foreign currency for critical imports.
If anything, this will be used to justify the existence of the
approved foreign currency dealers. This has not worked hence the reason we
still have shortages of fuel, bread, medicine, etc. We all remember the empty
shop shelves of the last hyperinflation years of 2000 to 2008. Inflation peaked
at 500 billion % forcing the scrapping of the Z$. The monthly inflation rate is
already 80% and rising. The madness of the hyperinflation years are back!
What a nightmare! The hyperinflation of 2000 to 2008 crippled
the Zimbabwe economy and force millions into abject poverty from which the
nation was struggling to recover. It must be heart-breaking to be dragging
straight back. Monthly inflation rate has surged from about 5% in January to
80% today. “Inhamo yamakandiya yadzoka!” (This is unending trouble!) as the great Thomas
Mapfumo once sung!
The timing of the banning of the use of all the foreign currencies as legal tender speaks volumes. Since the introduction of the local currency in 2016 it has managed to hold its own value against the foreign currency basket. It is only in the last six months that things started to change. In January the monthly inflation rate was 5% it is has since increased rapidly to 100% today. It is government's responsibility to contain inflation and it is clear the regime was failing to do so. The people would have responded to the rising inflation by rejecting the local currency as the medium of exchange as exemplified by teachers and other workers demanding to be paid in the more stable US$ and not the local currency.
ReplyDeleteThe banishing of all foreign currency as legal tender will, force the nation to trade in the local currency and end the demand for payment in US$. However, what is also certain to happen is that economic activity will drop significantly as people withdraw their goods and services because they do not trust the currency they will be paid in will keep its value.
At a monthly inflation rate of 100% the local currency will lose half its value every month! During the last hyper inflation years of 2000 to 2008 inflation peaked at 500 billion % and the corresponding exchange rate was Z$35 x 10^24 to US$1.00. Those on fixed incomes such as pension saving were forced into abject poverty as their incomes became worthless. Economic activity ground to a half, shop shelves were empty and survival was near impossible! We are heading for the return of those 2008 days!
@ Pasi Mapamba,
ReplyDelete"Unopenga why would i need forex when things are sold in Zim dollars unless i plan to leave the country i ve no need for forex .....usade kunyepera vanhu ne chirungu chakabhenda."
You do not know what inflation is or what it is doing to the value of the local currency. With inflation already at 100% in a country importing up to 70% of what it consumes those living in the country KNOW exactly what the local currency losing its value means. Teachers, nurses, everyone is asking to be paid in US$ rather than RTGS$ because the former is more stable and you misplaced sense of patriotism has nothing to do with that economic decision!
Before trading in foreign currency was banned, you could have offered anyone the choice to be paid in RTGS$ or US$ and more often than not he or she would have chosen US$! People are stupid!
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