Yesterday the Reserve Bank of Zimbabwe (RBZ) sent out a cryptic notice in which they said they were working on improving the operational efficiency and effectiveness of bureau de changes. It’s not exactly clear what they mean by this though.

Notice on the empowerment of Bureaux De Change to enhance the operational efficiency and effectiveness of the interbank foreign and exchange market. pic.twitter.com/LchmCdBoDe

— Reserve Bank of Zimbabwe (@ReserveBankZIM) March 6, 2020

The formal market has lost relevance

Last year the government licenced bureau de changes to fill the gaps in the interbank market which is dominated by banks. At some point they liberalised these exchanges to buy at market based rates but when the rate started to climb last year they made an about turn and restricted the price that the exchanges could pay.

According to measures made in September last year, exchanges could only pay rates within 7% of the inter-bank rate. That effectively neutered the exchanges and made them non-competitive just as they were about to catch up with the black market.

In the short term the bank got what it wanted, a lower interbank rate that those in power could point to as a sign of progress. In fact, the black market dipped slightly that week before it picked up pace with a vengence.

The problem with the central bank’s policies is that they are not benevolent and meant to achieve stability in the long term, rather they are informed by fiction and a desire to please the whims of those in power. They would rather peddle fiction however short-lived it might be.