The Reserve Bank of Zimbabwe caves in to black market pressure

The directive has pushed the exchange rate sharply as the Zimdollar weakened dramatically following the central bank-sanctioned liberalisation of the foreign
currency market by Reserve Bank governor, Gideon Gono.
The key changes were made through the first quarter monetary policy statement presented last week which floated the Zimdollar on the market and allowed market forces to determine rates on a willing buyer-willing-seller basis.
The move is aimed at crashing the parallel market in the pricing of cash, by removing distortions between the official and black market rate.
Officials in the central bank’s public affairs and information department said any violations of the regulations would be dealt with in terms of penalties provided in the legislation.
He said there had been a massive inflow of foreign currency into the official banking system over the past week.
The new law had adversely affected black market dealers that had been flogging forex using the parallel market rates.
The enactment of the exchange control order was prompted by the need to curb foreign exchange activities in the parallel market.
Violations of this order would constitute contravention of the Exchange Control Act and regulations made under it.
“Culprits will be dealt with in accordance with the law in terms of the Exchange Control Act,” said a spokesman.
The new statutory requirement was met with relief by holders of free funds.
“This is safe,” said Merjury. “I lost a lot of money on black market after being given counterfeit notes.”
But black market dealers, while remaining defiant, admitted that business had sunk to rock bottom levels.
Economists warned that while there was now no justification for anyone to go and do shady deals on the black market, stabilisation of rates would not be achieved any time soon because of the unsustainable
increases in money supply.
“The big question is how long it will continue before government stops it,” said respected economist Tony Hawkins. “With the rate that money is being printed, the rate can only go up and so will inflation. It is a vicious cycle.”
On Tuesday, the greenback was trading at ZD250 million.