You are aware that in any economy, where the currency has lost value, people would go for the safe currency, they convert money,” he said.

“Yet the demand for forex has been redefined to value preservation as opposed to demand for import purposes. In most cases, when talking about demand for forex you are tempted to think about demand for foreign currency for imports. “The above factors are a given, because when the supply is low and demand high, the rate will go up, but what has never been discussed in a detail is ‘what constitutes demand for foreign currency’. “This is a massive speculative storm, let us call it that hey, it is drawing real money out of the system, which is detrimental to the productive sector and constitutes transfer of asset, real wealth from people with savings and people on fixed salaries, people in the productive sector to speculators and traders,” Mr Cross said.Įconomist Professor Gift Mugano said factors behind the volatility of the domestic currency were over and above underlying factors of the state of the economy, including excessive money supply growth, constrained production and limited forex inflows. “It is very difficult to make a coherent comment on what is going on right now and for most of the stuff going on we have to be very careful because we do not want the market to understand what we are currently doing because much of the action has to be done by surprise. Unrelenting depreciation of the Zimbabwe dollar is the largest reason behind continued rise in annual inflation, which has consistently gone up from 5,39 percent in September 2018 to 676 percent by April this year, decimating incomes and savings values. Fears abound the culprits always find loopholes. The FIU also limited the daily and monthly thresholds for ZIPIT transfers done through banks.Įddie Cross, a member of the RBZ monetary policy committee, said speculators with loads of liquidity were speculating on the currency, adding that while the RBZ recently had made a number of drastic interventions to stabilise the rate, it kept running.

The Bank’s financial intelligence unit suspended all mobile money agents and directed the network operators to implement proper know your customer evaluations to make sure only genuine businesses used the platforms. To that end the central bank has recently demanded tighter controls and threshold limits on the perceived speculative activities by scores of licensed money transfer agents that included mobile money operator platforms and bank systems. The RBZ said it therefore intends to make interventions that have “elements of surprise”. RBZ governor Dr John Mangudya, recently said Zimbabwe was getting significant inflows of foreign exchange from gold, tobacco and other sources to support its import need, adding demand was also subdued due to disruptions caused by Covid-19, but the exchange rate and the currency have remained under pressure.įollowing the realisation, several policy measures taken to ensure exchange rate stability and, consequently inflation rate stability, were being circumvented and falling short. The domestic unit lost considerable grip after plunging from $2,5 to the US dollar at its reintroduction following a 10 year hiatus, de-linking of the parity with the greenback and then floating on the interbank market in February last year. The domestic unit, whose official rate is fixed at 25 to 1 against the US dollar, is trading as high as $73 to the greenback on the black market in what authorities believe is not supported by tangible or any reasonable economic fundamentals. Zimbabwe faces a critical moment in its quest to stabilise the local currency, which has endured exponential depreciation since reintroduction and on being floated early last year, due to the speculative effect and activities of cash-rich barons. The Reserve Bank of Zimbabwe (RBZ) will henceforth use ‘ambush raids’ as a strategy within its array of policy interventions as the monetary authorities battle to break persistent buffeting of the domestic currency by a “speculative storm”.Įconomists, however, believe that the battering of the Zimbabwe dollar since last year is the result of cross cutting issues that include confidence crisis, speculation, policy shortcomings and the domestic economy’s current structural challenges.

Money transport ambushed