Parallel market reflects skewed economy

HARARE - Zimbabwe's thriving parallel currency market has starved the official market of hard cash required to import food, power and energy as well as essential raw materials.

The US greenback is trading at around $5 million on the parallel market compared to the official exchange rate of $30,000 to one US dollar.

Analysts this week said the parallel market now handled more than 80 percent of the country’s hard cash earnings, with the remainder going through the official market.

Economist Witness Chinyama said the parallel market, which is threatening to cut short RBZ governor Gideon Gono’s stint as head of the central bank, was being driven by skewed expectations about the value of the local currency that had resulted in a shift towards consumption.

The bulk of the hard cash was in private hands and individuals and firms were only waiting for the introduction of a realistic exchange rate, he said.

“The thriving parallel market does not mean that Zimbabwe has no forex but is an indication that the Reserve Bank is not paying the right price to entice those with the money to sell through the official channels,” Chinyama said.

Questions have been raised over the influx of flashy imported vehicles and the construction of upmarket properties at a time Zimbabwe is facing the hard cash crisis.

zimbabwe has one of the largest fleet of imported cars in Africa, with some vehicle models hitting the streets of Harare within days of their launch in Japan or Europe.

“This is all a sign that the country has turned into a consumption economy and is also an indication of asset price inflation where people are trying to hedge against the instability of the Zimbabwe dollar by buying certain assets which they either keep or sell at a profit,” Chinyama said. – Zimonline

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