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Zimbabwe in Local Currency crisis

By Shingirai Vambe

Ecocash & Bond Notes- Change for USD

Harare – Following the Reserve Bank of Zimbabwe’s (RBZ) directive of closing Agent lines and reducing mobile money daily transactions, the US dollar has dominated the national market.

In a bid to fight inflation and black market rates which were sky rocketing, RBZ introduced foreign currency auction system which has seen prices of goods and services pegged in ZWL gaining traction costing higher or almost equivalent  to US dollars.

This has however made the US dollar to be more popular and it is already dominating the Zimbabwean economy as majority are no longer having access to mobile money and cash bond notes which have a withdraw limit from the bank thus ending up and preferring to use the USD hard currency.

While the US dollar remains an illegal tender in Zimbabwe’s most markets, government has allowed few entities to use it while paying  taxes in the same denomination, a move which is far-fetched as both Zimbabwe Revenue Authority (ZIMRA) and RBZ don’t have the mechanisms in their systems to regulate or identify who or which product was paid in foreign currency.

This is regardless to the Zimbabwe economic and political crisis which has left many people unemployed and resorting to informal trading.

In an interview with economist, John Robertson, told Post On Sunday that Zimbabwe’s main challenge was of mismanagement of funds and resources as well as manufacturing industries.

“To mark the end of Zimbabwe first decade as an independent country, the World Bank, followed by the International Monetary Fund (IMF), intervened with their trade Liberalisation and then Structural Adjustment Programme Unfortunately these supported retailers much more than manufactures”

Robertson added, with the adoption of the US dollar a decade ago it arrested the hyperinflation and permitted the government to abandon many of its controls.

Currently the government of Zimbabwe has put in place too many controls and measures which include the use of agent lines, payment of salaries which was done using bulk Agent lines and this alone has grossly affected the circulation of local money and the bond note in the market.

Informal traders views and comments are that of bond not the best denomination to have in one’s pocket regardless of the regained value against USD or Rand and its scarcity.

In 2016 when the bond note was introduced its value was derived from a $200 million (189 million euro) bond facility guaranteed by the Egypt-based Afrexim Bank.

According to Reserve Bank of Zimbabwe Governor John Mangudya, he said the bond notes are an export incentive for exporters to earn foreign currency the country is in dire need of but the end and tale of the introduction and use of Zim dollar remain skeptical.

Persistence Gwanyanya told Post On Sunday that with fuel being sold in US dollars it was more likely to lead to dollarisation of the economy which had already self-dollarized after the energy sector had highlighted of a discrepancy against the required value for electricity and fuel.

In Zimbabwe, mobile money and bond notes or ZWL as said when they were introduced, have become change of the US dollars with the current official rate standing at 1:85 and 1:90 on informal market respectively.

“While sanitizing the local currency government institution continue to receive their fares in ZWL and that alone interpret to the lost value of services rendered” said Robertson.

Yesterday Zimbabwe Energy Regulatory Authority (ZERA) published new current fuel prices review which is at  ZWL $97.93 for petrol and ZWL $86.36 for diesel 50, surprisingly the price of fuel went up in US dollars from USD $1.10 to $ 1.18 per litre and most fuel stations are now charging ZWL $100.00.

This has made most service stations to have enough of the commodity as the prices equates with that of USD in other fuel stations, making it difficult for those who are earning ZWL which is not yet reviewed to meet the current poverty datum line (PDL).