HARARE – Zimbabwe’s runaway cash black market is anticipated to remain firm in the wake of a deepening foreign exchange scarcity that saw the United States dollar premium surging to 400 percent as at midday yesterday.
While monetary authorities have gazetted a law to curb illegal cash and foreign currency trading — with offenders doomed to face a mandatory 10-year jail term, as their cash is forfeited to the State while their bank accounts are frozen — the thriving underground market has remained defiant.
Equity analysts at IH Securities (IH) said while the recent announcements from monetary and fiscal authorities were anticipated to encourage exports, the development had resulted in a thriving black market as government failed to issue uniform pronouncements on the state of affairs in Zimbabwe.
“Going forward, we believe, however, that the parallel market will likely remain firm against this ambiguity and on-going lack of dollar liquidity.
“In addition, the existing money transfer tax which had been capped at $0,05c per transaction has now been increased to an effective two percent tax on nominal value of transfers in a measure intended to increase the tax collection base, it is our view that there will be resistance to the level of taxation which seems punitive at two percent,” IH said in its September snapshot.
Following the central bank’s monetary policy statement last week, parallel market rates surged as Zimbabweans got into panic mode — despite frenzied window-dressing measures by both fiscal and monetary authorities — locals have been hoarding groceries to store value of deteriorating RTGS balances.
By close of business yesterday, in the two major cities Bulawayo and Harare‚ most pharmacies were no longer accepting payments in electronic transfer or the local bond note‚ preferring the American dollar or the rand.
Various shop owners said they had opted to shut down to prevent government from revoking their operating licenses if they demanded cash.
Yet government’s mouthpiece remains in denial.
While the country has legislation outlawing cash trading, the practise has gained traction on the back of premiums attached to the United States dollar — the country’s anchor currency in a multicurrency system of eight currencies — which has been scarce due to cash shortages the country has been experiencing for the past two years.
Earlier this year Zimbabwe gazetted a law to fine anyone caught in possession of US$10 000 or equivalent and above without “reasonable justification”.
According to the Finance Act of 2018 gazetted earlier this month, those caught with money above the stipulated amount will be penalised with the State confiscating the excess cash held, fined or prosecuted.
While the central bank has specified that Zimbabweans can only carry US$2 000 or equivalent outside the country as on-person cash, before this law the country did not have a maximum threshold for on-person cash holdings.
As a result of cash shortages, major businesses and locals are now heavily dependent on the black market for hard currency, a factor that has been driving the premiums even higher. — The Financial Gazette