BANKS MAIN CULPRIT IN BLACK MARKET CASH DEALING | Banks have been fuelling the currency black market in Zimbabwe by moving bond notes onto the streets in search of the now elusive US dollar, economic experts, monetary and fiscal authorities have confirmed.
Among the busiest black market spots is a trans-border bus terminus to the east of Harare and around a shopping mall in the city centre, where dealers wave wads of the surrogate currency to potential clients.
As at Thursday morning, 140 dollars worth of bond notes were buying 100 US dollars.
The monetary system went into a “shock” in the week as the informal market exchange rates for the RTGS and bond note relative to the US dollar drastically plummeted, a syndrome of the debilitating economic environment.
Leading financial research firm Equity Axis said banks have been instrumental in fuelling the crisis through funding parallel market dealers and similar activities.
“These developments have also stoked inflationary expectations, and as the exchange rate disparities worsened during the week, prices of most basics responded (by shooting up),” Equity Axis said.
This comes as local banks have run out of bank notes, forcing people to spend hours at financial institutions queuing for money.
Reserve Bank of Zimbabwe (RBZ) governor John Mangudya has accused bankers of “abuse of office” and said their move to channel cash to illegal black market dealers was “a sign of the ugly face of indiscipline.”
The Central Bank has established dedicated hotline numbers —TelOne — 08006009 and Econet — 08086770 — for the public to report individuals and firms or traders that may be involved in cash hoarding, selling or abusing or externalising of cash, or any related misdemeanour.
A reward equivalent to five percent of the reported and recovered cash amount will be offered by the Central Bank.
Critics said Mangudya has hopelessly failed to keep his earlier promise on bond notes because illegal black market dealers are now the only people who seem to have access to this fiat currency.
Bankers Association of Zimbabwe president Charity Jinya said they were against “illegal or unethical practices by both clients and members of staff within banking institutions” and urged people to report bank officials engaged in the currency black market via RBZ hotline numbers.
Former Finance minister Tendai Biti — who helped stabilise the economy during the 2009-2013 GNU era, keeping the government on tight budgetary leash and wooing back foreign investors — blamed the RBZ for pumping money into the black market.
“There is only one bank that has gone rogue and that is the Central Bank itself,” Biti told the Daily News yesterday.
“It is printing and selling bond notes to acquire much needed foreign currency to finance various obligations including Eskom.”
Sentiments in the economy are that the situation will worsen and economic participants are positioning themselves through accumulation of assets and real money US dollars at minimum losses in a manner exhibited on the Zimbabwe Stock Exchange (ZSE) over the past few months.
“An overrun budget, constant government overdraft demands, possible election funding demands and a doubling up of the bond notes circulating in the market are factors that have unnerved economic participants and formed expectations of a worsening economy,” Equity Axis said in a commentary.
Rent seekers have likewise taken advantage of the expectations, mopping the hard currency in the market for resell at superior rates.
University of Zimbabwe economics professor Ashok Chakravati said rent seekers can only aggravate a situation if there is a fundamental imbalance.
“Otherwise if they try and arbitrage on foreign exchange or any or trade, they will themselves be wiped out from the market,” he said.
“The reason why their activities have an excessive impact on the currency market is that there is a structural shortage of foreign currency, that is US dollars. For dollarisation to succeed and for there to be adequate liquidity in the market, we need to have a constant source of US dollars.
“This is not the case in Zimbabwe, where apart from not having any access to the international banking system, our import bill is greater than our export earnings.
“It is for this reason, that rent seekers, forex traders or whatever you would like to call them can exploit this fundamental shortage to their advantage and create even greater imbalances and consequently unrealistic premiums in the market.”
He said he did not know if banks have been fuelling this crisis by becoming arbitrageurs themselves and active participants in the forex market.
“I know nothing about this, and the Reserve Bank would be the best authority to comment on this matter. However, if they are doing this, it amounts to economic sabotage and it needs to be dealt with by the monetary authorities,” he told the Daily News.
“The Reserve Bank has put in place a foreign exchange management system, with banks expected to allocate forex based on priority lists.
“This system should be tightened with proper monitoring of forex allocations by banks so that leakages to non-priority uses, which is where the parallel market funding may happen, is minimised.
“If banks are able to fund parallel market activities, then it means that the Reserve Bank’s monitoring and reporting systems are weak and need to be immediately strengthened. That is the best way that the Reserve Bank can ensure that nostros held by the banks are strictly allocated to priority uses,” he said, adding: “Keep in mind that unlike in 2008, our country is not broke.
We have a foreign exchange earning capacity of almost $5 billion per annum, if we add up the exports, Diaspora remittances, FDI and aid receipts.
“If this amount is managed prudently and systematically, with good allocation and monitoring systems, there is no reason for us to face shortages of basic items such as fuel, power supply, drugs, basic commodities, etc. There may be shortages of imported items, but these will not be essential items such as I have indicated,” Chakravati added.