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Zimbabwe’s ‘Zollar’ being manipulated by political elites

In depth
This article is part of the dossier: Zimbabwe’s ‘Zollar’ being manipulated by political elites

By Nicholas Norbrook
Posted on Monday, 13 May 2019 09:00

Zimbabwean Finance Minister Mthuli Ncube arrives to deliver his 2019 Budget speech at Parliament in Harare, Zimbabwe, November 22, 2018. REUTERS/Philimon Bulawayo

The failure of the government to manage the currency risks turning Zimbabwe's financial crisis into a political tinderbox.

Despite currency reforms at the beginning of April, there is still a wide gap between the official and parallel market, reports Africa Confidential.

The reason: “senior figures in the ruling Zimbabwe African National Union-Patriotic Front are profiteering by buying currency at the official rate and selling it at the unofficial rate.”

The central bank introduced the new currency – dubbed the ‘Zollar’ – on 22 February, which was effectively a 60% devaluation. “But this was way above the parallel market’s real-world valuation. The official rate is US$1 = RTGS 3, but in the parallel market the rate is US$1 = RTGS 5.”

  • Now, corrupt Zimbabwean officials with access to scarce foreign exchange are blocking finance minister Mthuli Ncube from going through with the full currency reform, as this would hit their profits.
  • And Zimbabwe’s Reserve Bank Governor John Mangudya is unable to act, either. He failed to show at the IMF and World Bank Spring Meetings, having to travel elsewhere to raise cash. “Insiders say he’s unable to act because the people with doing the currency roundtripping deals outrank him in government.”

What’s next?

As Sudan and Algeria see full-blown revolutions, are Zimbabwe’s politicians concerned?

  • “The government agreed to a 29% salary increase for civil servants in early April, but it falls far short of their demand for a minimum wage of $3,000 a month. The increase narrowly averted a strike.”

Bottom line: New protests are being organised. The last serious ones knocked out the government and led to the overthrow of former President Robert Mugabe.

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