Zimbabwe’s biggest business group warns local currency could collapse

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FILE PHOTO: New Zimbabwean two dollar notes and coins are shown outside a bank in Harare, Zimbabwe, November 12, 2019. Businesshala/Philimon Bulawayo/File photo
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HARARE (Businesshala) – Zimbabwe’s currency is in danger of collapsing as companies rely on the US dollar for transactions, the country’s main business group said in a letter to its members, amid crackdown on black market currency trading.

Following the arrest of several forex traders over the past few weeks for allegedly engaging in trading US dollars on the black market, the government on Thursday banned businesses that use black market rates to price their goods and services. threatened with suspension.

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

“The biggest risk facing the economy right now is an unfair policy response to rising parallel market premiums,” the organization said, referring to the difference between official and black market currency values.

“A ban on informal forex trading in the absence of a practical formal market would have disastrous consequences for the economy.”

The value of the domestic currency has weakened from $2.5 per US dollar in February 2019 to 88 per US dollar on the official market by October 11. According to Online, it is quite weak in the black market at around $170 per dollar. Currency rate monitoring website zimrates.com.

The CZI said the weekly forex auction system, introduced by the government in June 2020, needed to be overhauled as it was no longer efficient, taking up to 15 weeks – instead of two days – to allocate foreign exchange, which development was stopping. Why business?

“The Zimbabwean dollar is now in a real crisis … well-considered policy measures should be implemented by the authorities aimed at restoring confidence in the currency markets,” the CZI said.

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

Reporting by Nelson Banya; Editing by Promit Mukherjee and Mark Potter

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