Economists warn against Zimbabwe’s currency black market
September 08 2010
, 6:12:00
Thulasizwe Simelane, Zimbabwe
Economists say the resurgence of Zimbabwe’s currency black market is
symptomatic of weaknesses in the banking sector and exchange rate
distortions. Black market traders who were partly responsible for the demise
of the country’s currency two years ago, are now back on the streets dealing
in US dollars and the South African rand.
While the Government has downplayed the impact on the financial system,
economists are warning that the informal market could become a permanent
part of the economy.
Harare’s city centre is suddenly littered with cash-dealers, offering
competitive rates for US dollars and Rands. The scene is reminiscent of the
hyper-inflation era when black market traders dictated the value of the Zim
dollar, on an hourly basis.
The Finance Ministry says it is not perturbed by the practice, as it is
unlikely to destabilise the market, a view shared by some economists. “We
have nothing quite as wild as the Zimbabwe dollar was, where you might get a
thousand times as much for something you buy today and you sell it tomorrow.
That sort of thing is not going to happen, when you are dealing in hard
currencies,” says economist John Robertson.
But, others believe the new black market is a tell-tale sign of liquidity
challenges, uncompetitive exchange rates and inefficiencies in the banking
system. “People without accounts transact easily at the Roadport without any
papers and it looks like it is actually better for them to do so, than go
through the banks where the money first of all is more expensive and
secondly there is a lot of waiting,” says economist Daniel Ndlela.
Ndlela warned that the result is that significant cash transactions are
by-passing the financial system and hence, are not captured.
Zimbabwe ditched its worthless Dollar early last year, in favour of a
cocktail of foreign currencies.