A wild goose chase

September 30, 2021

Government this week went for the jugular in its fight against the illegal foreign currency trades: it named and shamed 30 individuals involved.

In a statement, central bank chief John Mangudya said the Financial Intelligence Unit (FIU) has identified individuals for abusing mobile telecommunications services and other social media platforms to promote and facilitate illegal foreign exchange transactions and money laundering activities.

He said the FIU has instructed banks, mobile money operators and other financial service providers to identify and freeze any accounts operated by these individuals and, further, to bar them from accessing financial services for a period of two years, with immediate effect.

“Over and above the corrective measures of barring the delinquent individuals from accessing banking and financial services and operating mobile phone lines, the FIU has forwarded their names and particulars to law enforcement agencies for prosecution,” Mangudya said.

The impression it gives is that the illegal forex trades have been tamed now that the FIU has named, shamed and dealt with the culprits after it also asked the Postal and Telecommunications Regulatory Authority of Zimbabwe for their mobile lines to be blocked.

The naming and shaming also comes as a number of companies and individuals appeared before the courts this week for illegally dealing in foreign currency.

Even with the such a tough stance, the parallel market for foreign currency is thriving, an indication that authorities are closing the stables while the horses have bolted.

They are addressing the symptoms and not the problems. Companies have been complaining that they are taking longer than expected—at most two months—to get the foreign currency allotted at the auction system.

That backlog has been growing amid questions by analysts why the weekly allotments were increasing when companies cannot access the foreign currency. Last month, the central bank’s Monetary Policy Committee urged RBZ to clear the US$175m foreign exchange backlog within a month as it moved to improve the auction system.

“The MPC urged the Bank [RBZ] to clear the backlog in a month’s time to enable the Bank to operate the auction system within the set rules of funding auction allotments within two weeks from the date of auction,” Mangudya said in a statement.

Critics say the failure by the auction to allot the foreign currency has fuelled the parallel market. For companies, they have to survive and will use all means possible to stay afloat. It’s not only the foreign currency shortage they have to contend with: they are still to shake off the effects of the Covid-19 pandemic.

History has shown that every time the government takes the parallel market head on, it has come out bruised.

Illegal foreign currency trades will go underground briefly and emerge later with rates going up.  The past month has seen rates going up, thereby pushing up the prices of basic goods and services amid fears the upward trend will steal the festive cheers. Annual inflation, which had been on a descend for the past 13 months bucked the trend this month, rising to 51.55% from 50.24% in August.

The auction system needs refining for it to play its critical role. The central bank can elicit views from the business sector to make the system working again and help stabilise prices.

The economy  wants solutions not another wild goose chase.

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