Zimbabwe’s biggest business group warns local currency could collapse

Forex27 minutes ago (Oct 11, 2021 11:27AM ET)

(C) Reuters. FILE PHOTO: Zimbabwe’s new two dollar banknotes and coins are shown outside a bank in Harare, Zimbabwe, November 12, 2019. REUTERS/Philimon Bulawayo/File Photo

HARARE (Reuters) – Zimbabwe’s currency is in danger of collapsing as companies resort to the U.S. dollar for transactions, the country’s main business group said in a letter to its members, amid a crackdown on black market currency trading.

Following the arrest of scores of foreign currency traders over the past few weeks alleged to be involved in black market U.S. dollar trading, the government on Thursday threatened to suspend the licences of businesses using black market rates to price their goods and services.

The Confederation of Zimbabwe Industries (CZI), the largest representative body for business, said it had cautioned the government against criminalising firms and traders, according to the letter sent last week and shared with the media on Monday.

“The greatest risk facing the economy right now is an inappropriate policy response to the rising parallel market premium,” the organisation said, referring to the difference between official and black market currency values.

“Clamping down on informal foreign exchange trading in the absence of a viable formal market will have catastrophic consequences for the economy.”

The value of the domestic currency has weakened to 88 per U.S. dollar on the official market as of Oct. 11 from 2.5 a dollar in February 2019. It trades significantly weaker, at around 170 to the dollar, on the black market, according to online currency rate monitoring website zimrates.com.

The CZI said the weekly foreign currency auction system introduced by the government in June 2020 needed to be overhauled as it was no longer efficient, taking as many as 15 weeks – instead of the intended two days – to allocate foreign exchange, which was hobbling growth of business.

“The Zimbabwe dollar is now in real peril … well considered policy measures must be implemented by the authorities aimed at bringing back confidence into the currency markets,” the CZI said.

The southern African nation abandoned its currency in 2009 but President Emmerson Mnangagwa ordered its return in 2019.

Zimbabwe’s biggest business group warns local currency could collapse

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

Related Articles

Shipping firms that fly red ensign flag to be offered tax breaks

Global shipping companies will from April 2022 be offered tax breaks...

Subscribe to our stories

Join the exclusive subscription today and get premium articles for free

Same Category

Shipping firms that fly red ensign flag to be offered tax breaks

Global shipping companies will from April 2022 be offered...

Chip crunch deals blow to Volkswagen as Q3 falls short

Stock Markets7 minutes ago (Oct 28, 2021 02:46AM ET) (C)...

Stellantis Q3 sales down 14% due to 600,000 units in lost production from chip crisis

Economy23 minutes ago (Oct 28, 2021 02:30AM ET) (C) Reuters....