There was a ray of hope when the esteemed Minister of Finance was appointed to this position. After all, people opined, he is a technocrat who will bring sense to a government that has tended towards populism and unbridled spending. Two years later it seems all that hope was misplaced.
The rate which was just below $2 ZWL to 1 USD when he came into office skipped to $3.5 in 6 months and has ballooned to over $30 ZWL in the space of barely a year. The sad thing that it hardly looks like it’s going to stop anytime soon.
In the meantime, the government continues to preach about the interbank market which has failed miserably to quench businesses’ thirst for foreign currency. Businesses are so parched at the moment capacity utilisation has dropped down to less than 30%.
The main reason why the interbank rate is failing is that the government has deliberately hemmed it in by making sure there is nothing free about that market. There was a time last year when the rate threatened to converge with the black market rate, inflows to it began to improve as businesses chose the legal route to sell their foreign currency rather than trade at black market which now barely offered any advantages.
The government was incensed and through the RBZ decided to cut the feet of some of the traders. Now it’s just a robbery market where a few helpless businesses get robbed of their foreign currency. This has prompted businesses to externalise and keep their forex abroad making the thirst for it here even more intense.
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