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Why forex black market is thriving despite mass arrests

Reserve Bank of Zimbabwe governor John Mushayavanhu says the ZiG will gain more acceptance with time and this will reduce demand for US dollars.

HARARE residents say the parallel forex market is their main source of foreign currency as banks are failing to meet their needs at a time the government is clamping down on money changers.

Despite the mass arrests of illegal forex traders, the parallel foreign currency market continues to  flourish.

The arrests followed the introduction of a new currency, the Zimbabwe Gold (ZiG) early this month to replace bond notes that had been ravaged by inflation.

On Friday the United States dollar was  trading at US$1:ZiG18 to ZiG20 on the parallel forex market, against its official rate of US$1:ZiG13,38.

A snap survey in Harare’s central business district  showed that most people were getting their foreign currency on the streets.

Patrick Shoko* said  he would be forced to turn to the streets  to pay rentals, which were pegged in US dollars.

“I am very worried about this situation,” Shoko said.

“ How are we going to pay our rentals and buy fuel if we don’t have access to foreign currency?

“I cannot get it from the bank because I need to have an invoice to access foreign currency.

“Personally, my landlord told me that he will not accept anything that is not US dollars for rent.

“He told me that the only things that I can pay using ZiG are electricity and water bills.

“I am very stressed because where I work we get 75% of our salaries in local currency.

“The US component is not enough to cover my rentals. I might end up on the streets.”

Caroline Motsi* concurred saying the authorities should at least allow the general public to have access to a fixed amount in foreign currency through the banking system.

“Where will I get the invoice to ask for foreign currency to buy fuel for my car? "They are the ones, who said that they cannot force service stations to sell fuel in local currency, yet they are not willing to give us the US dollars when we need them,” Motsi said.

“These policies are insane. They should make the availability of foreign currency flexible for everyone or rather make it possible to get a certain number of US dollars from the bank monthly in exchange for the ZiG.

“That would make our lives easier.”

Combined Harare Residents Association director Reuben Akili said  government departments must charge for their services in local currency.

“If you look at it closely, the government departments are asking for the US dollar, for example, the passport office,” Akili said.

“They are giving people the ZiG, but the government departments are asking for US dollars for services.

“ So for someone to apply for a passport, he or she will have to go to the black market to get the foreign currency.

“This is a conversation that has been ongoing over time and the government needs to understand that for the public to have confidence in their currency, they have to accept their ZiG.”

He also noted that the black market strives due to its constant supply of much-needed local currency from government contractors.

“We have also come to understand over time that the government pays its contractors in both US dollars and local currency," Akili said.

“These contractors tend to get rid of the local currency on the black market. That is how the black market strives.”

Bankers Association of Zimbabwe chief executive officer Fanwell Mutogo said foreign currency was only available for people with genuine invoices only.

“Foreign currency from banks is only accessible to those companies and individuals with genuine invoices for external obligations,” Mutogo said.

“It is also important to note that we are in a dual currency regime, and in both the informal and formal sectors, people are getting a portion of their salaries in US dollars, which they can use for local obligations such as rent and fuel.

“Individuals with genuine invoices for external obligations such as fees, healthcare, etc can access foreign currency from their banks.

“Requirements for one to get foreign currency from a bank can be obtained from your bank.”

Reserve Bank of Zimbabwe governor John Mushayavanhu says the ZiG will gain more acceptance with time and this will reduce demand for US dollars.


*Not their real names


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