Zimbabwe cracks down on black market forex trade to prop up ZiG currency

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Authorities in Zimbabwe have ramped up their crackdown on the black market for its new currency, a move bankers say is starting to bear results.

The Reserve Bank of Zimbabwe (RBZ) launched the Zimbabwe gold (ZiG) in April. Backed by $100 million in foreign currency reserves and 2.5 tons of gold, ZiG is the country’s latest stab at monetary stability, which has eluded it for decades.

ZiG has performed decently against the U.S. dollar on official channels, gaining 1.9% since its debut in April, starkly contrasting its predecessors.

However, some old challenges are coming back to haunt the new currency. One is black market forex trading, which authorities intend to clamp down on.

In the past month, the RBZ has led a multi-agency crackdown on black market traders. This led to the arrest of over 200 illegal forex traders across the country. The central bank’s Financial Intelligence Unit (FIU) also froze nearly 100 accounts and fined 40 people for their involvement in this trade.

The FIU claimed its crackdown had led to “a significant decline in the number of illegal money changers operating in the Central Business District (CBD) and surrounding areas.”

Commercial lenders also claim to have noted an uptick in forex trading volume on official channels.

“The parallel market is not as loud and visible as it was before the latest blitz,” stated Lawrence Nyazema, the president of the Bankers’ Association of Zimbabwe.

FIU has pledged to continue its crackdown and called on the public to report any illegal FX dealers or any merchants who refuse to accept the new currency.

Please report traders who are refusing to accept ZiG or are exceeding the official ZiG / US$ exchange rate to the Financial Intelligence Unit on Hotline and WhatsApp numbers: 0714039897/0780434475@ReserveBankZIM

— Financial Intelligence Unit of Zimbabwe (@FIUZimbabwe) June 4, 2024

However, this pledge to force ZiG usage faces a significant challenge: some government departments still refuse to accept the new currency and insist on the USD, which a South African economist described as “behaving like someone who feeds on takeaways but wants others to eat the food they cook.”

Another challenge has been the insufficient supply of ZiG notes and coins. While the RBZ launched physical cash in May, Zimbabweans have to queue for hours to access it.

To solve this, the RBZ announced this week that it would use its subsidiary Homelink to offer access to ZiG’s lower denominations, including ZiG1, ZiG2, ZiG5 and ZiG10. The bank is holding off on releasing the larger denominations to choke the black market and force the citizens into the banking halls.

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