PRESIDENT Emmerson Mnangagwa says his administration has no immediate solution to dealing with illegal foreign currency trade despite admitting its role in the economic crisis.
Last week, official figures showed that inflation nearly doubled to 175,66% in May from 97,85% in the previous month, revealing an economy already in hyperinflation, a situation last experienced in 2008.
Government suddenly outlawed the use of foreign currencies on June 24 in favour of the re-introduced Zimbabwe dollar in part to catch out foreign currency speculators, which it blames for price volatility.
After liberalising the interbank market, the official exchange rate has shot up to $8,86 to the greenback compared to $10,1 on the parallel market which has persisted despite a crackdown by law enforcement agents.
Prices remain high because much of Zimbabwe’s economic activity takes place in the informal sector, where costs are set based on the higher parallel market rate.
In the case of large retailers, prices are set based on internal inflation tracking, which invariably is higher than the official rate.
Addressing a Zanu PF women’s league national assembly at the party’s headquarters last Friday, Mnangagwa said he did not have an immediate response on how he intends to deal with them.
“You have mentioned the issue of money changers selling our money to the people; yes, we see that on TV and we are still asking ourselves what we can do to deal with that. It is something that we are still looking
at,” Mnangagwa told the party supporters.
Before his address, the women’s league boss, Mabel Chinomona, had pleaded with Mnangagwa to deal with the money changers, who she accused of fuelling price increases of basic goods and services.
“President, you said no more to money changers, but we have seen them coming out in their numbers and now they are using cars near the post office. Our people are going there looking for money, our own local currency is being sold there. The question is who is giving those people that money. You find them with new notes and the question we want to know is: Who is funding these people?” Chinomona asked
But the opposition has charged that Mnangagwa had no capacity to deal with illegal money changers because his administration was involved and driving the illegal market.
MDC secretary for economic affairs, Tapiwa Mashakada said as long as the State was involved in the illegal market, the vice would continue unabated.
“Under normal circumstances banks and bureaux de change sell or buy forex on a willing-buyer, willing-seller basis, provided the forex is available. In the case of Zim, the official forex market (interbank market) is dry, hence buyers and sellers go to the parallel market, where they can get forex,” Mashakada said.
“It is alleged that government is the main driver of the parallel market because questions are raised when new bond notes are traded on the black market. It is illegal, but in this case, it is the only reliable source of forex. No country has managed to completely eliminate the parallel market. It can only be minimised.”
The Zanu PF youth league last month named senior Zanu PF officials and some top government officials, who they said were involved in illegal forex deals, including the son of Information minister Monica Mutsvangwa, Neville.
Mnangagwa promised to set up a commission of inquiry to probe the allegations. But the commission is yet to be set up.