Zimbabwe’s command economics rattles the markets again

By Farai Shawn Matiashe

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Posted on June 21, 2021 10:45

People walk past a money-changers sign at a market in Harare
People walk past a money-changers sign at a market in Harare, Zimbabwe, November 26, 2020. REUTERS/Philimon Bulawayo

A new decree from President Mnangagwa’s government to abolish the parallel market and shore up the ailing local dollar could prove counter-productive and drive up inflation again, according to traders in the capital.

Before the new policy put in place by President Mnangagwa’s government, the US dollar was trading on the black market at 1:120 Zimbabwean dollars (Z$), while the official exchange rate was $1:Z$85 at the time of writing.

On 26 May, the government passed the Statutory Instrument 127 of 2021 (SI 127) that amends the country’s financial regulations. Its key points are as follows:

  • Businesses are barred from selling goods and services at an exchange rate above the ruling auction market rate;
  • Buyers must be issued a receipt in Zimbabwean dollars for a payment made in foreign currency;
  • Buyers should get a discount for paying in foreign currency;
  • Businesses and individuals will be fined if they refuse to accept payment in Zimbabwe dollars.

But two weeks after the government introduced the new rules, the parallel market premium enjoyed by the US dollar over the local dollar remains the same

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