The two financial institutions whose operating licences have been suspended by the Reserve Bank of Zimbabwe (RBZ) over alleged illegal foreign currency dealings, were reportedly behind the sudden and drastic fall of the Zimbabwe dollar exchange rate in the last few days.
After the Zimbabwe dollar exchange rate against the United States dollar appeared to steadily strengthen since the 21 day lockdown started over a week ago, particularly on the parallel market, the exchange rate suddenly started rising again, inexplicably, over the last few days.
The RBZ had fixed the rate at 25 to the greenback just before President Mnangagwa announced the lockdown to contain the spread of Covid-19, as part of broad measures to ensure certainty of pricing, make transating easier and minimise the deadly impact of the pandemic.
Alert Reserve Bank officials noted the suspicious rate movement lately and traced it to illegal forex buying by Cash Twenty-Four and Crediconnect, which are licensed bureau de change and credit only microfinance entities, respectively, prompting authorities to suspend their licences.
“The suspension of the institutions’ operating licences is with immediate effect, pending further investigations. If found guilty, the institutions will be liable to further regulatory action, which could result in cancellation of licence and / or criminal prosecution,” RBZ Governor Dr John Mangudya said in a statement on Friday.
He said the bank was in possession of information showing that the two institutions have been engaging in illicit foreign currency transactions, which have been adversely affecting the
As such, highly placed central bank sources further confirmed that the bank had proved that the two financial institutions were behind a hard currency buying spree that has been pushing the exchange rate up of late, possibly explaining the recent dramatic increase in the prices of basic goods.
The bank has also reportedly managed to identify registered entities on whose behalf the two financial institutions were buying the foreign currency in a manner that had serious negative impact on the domestic currency.
Due to the acute shortage of foreign currency and the limited access on the formal interbank forex market, in an imports dependent Zimbabwe, a good number of businesses, registered and informal, depend on the parallel market to get forex.
The parallel market exchange rate between the Zimbabwe dollar and US dollar has creeped up from as low as 33 last week to a high of 44 by Thursday, pushing prices up in its wake at a time the majority have either no income at all or are unable to work because of the ongoing lockdown.
This comes amid strong concerns from authorities over the spate of wanton price increases during the period of the national emergency due to Covid-19, amid fears of predatory pricing in times of a pandemic, which has killed tens od thousands and infected hundreds of thousands others.