Some illegal foreign currency dealers have been pushed out of “business” as Statutory Instrument (SI) 142 of 2019 effects continue to hold fort on the foreign exchange market, forcing rates to tumble.
Government, on Monday last week, changed the monetary system through (SI) 142 of 2019 also known as Reserve Bank of Zimbabwe (Legal Tender) Regulations, which instantly saw the US$ rate to the Zimbabwe dollar plunging from a high of 1:16, settling at around 1:8.
The ever rising parallel market exchange rate which at one time reached a high of 1:16 had eroded workers’ income as inflation spiked to 97 percent last month, resulting in employees demanding US dollar salaries which most employers as well as Government couldn’t afford.
Hope among speculators was that the regulations’ effects would be temporary and wane in the weekend thus making the interbank forex market unattractive to the US dollar holder.
However, the regulations appear to have struck the right chord thus far as speculators are failing to better what is being offered on the official market.
The US dollar to the local dollar rate was as at yesterday afternoon trading at 1:7,8 according to the RBZ’s website, but higher at some local banks.
In a survey carried out by The Herald Business in Harare yesterday, dealers in the capital were either offering to pay less than what is obtaining on the official market or paying exactly the same.
The dealers conceded they had been caught off-guard by SI 142 of 2019.
“The biggest thing in the SI that has rendered us useless is that provision making the Zimbabwe dollar the only legal tender,” said an illegal foreign currency dealer who declined to be named.
“We were getting RTGS float from big corporates to buy the US$ for them and that is what was pushing the rate up. But since Monday last week, there is no company that is coming to us for US dollars.
“What we are dealing with are just very small amounts and these are coming from people who are largely unaware of the rate on the formal market but it’s nothing much to sustain a parallel market industry as was the case before,” said the dealer.
Government also hiked interest rates for bank loans from 15 percent to 50 percent as a deterrent measure to curb speculative borrowing as some speculators were borrowing from banks in order to buy the US$ thus increasing its demand and pushing the rate.
The economists round-table contends that the Zimbabwe dollar could firm further than the current US$1:$7,8 rate as demand for the country’s sole legal tender is poised to increase.
The economists, however, said the local money should not be too strong so as to make the country’s industrial cost of production competitive compared to regional and international standards as a way of stimulating the much needed exports.