Zimbabwe’s largest business group warns local currency could collapse By Reuters


© Reuters. FILE PHOTO: Zimbabwe’s new two dollar bills and coins are on display outside a bank in Harare, Zimbabwe, November 12, 2019. REUTERS / Philimon Bulawayo / File Photo

HARARE (Reuters) – Zimbabwe’s currency is at risk of collapsing as businesses resort to the US dollar for transactions, the country’s largest trading group said in a letter to its members, amid a crackdown on trade in currencies on the black market.

Following the arrest of numerous foreign currency traders in recent weeks on suspicion of being involved in trading the US dollar on the black market, the government on Thursday threatened to suspend the licenses of companies using US dollar rates. black market to fix the price of their goods and services.

The Zimbabwe Confederation of Industries (CZI), the largest corporate representative body, said it had warned the government against criminalizing businesses and traders, according to the letter sent last week and shared with the media. Monday.

“The biggest risk the economy is currently facing is an inappropriate policy response to the growing black market premium,” the organization said, referring to the difference between the values ​​of official currencies and those of the black market.

“The crackdown on informal foreign exchange trading in the absence of a functioning formal market will have catastrophic consequences for the economy. “

The value of the national currency weakened to 88 per US dollar in the official market as of October 11, from 2.5 per dollar in February 2019. It is trading significantly lower, at around 170 per dollar, on the black market, according to online exchange rate monitoring website zimrates.com.

The CZI said the weekly currency auction system introduced by the government in June 2020 needed to be revised as it was no longer effective, taking up to 15 weeks – instead of the planned two days – to allocate currency, which hampered growth. work.

“The Zimbabwean dollar is now in real danger … well thought out policy measures must be implemented by the authorities aimed at restoring confidence in the foreign exchange markets,” CZI said.

The southern African nation gave up its currency in 2009, but President Emmerson Mnangagwa ordered its return in 2019.

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