Before the national lockdown on March 30, the local unit was trading around ZW$35 to the United States dollar (USD). Within a week, it had raced to ZWS$45 and now hovers between ZW$60 and ZW$65 to the greenback.
It has been said before that Zimbabwe generates enough foreign currency (forex) to meet its requirements. There is empirical evidence to back this up.
This begs the question; what is driving the forex rates even at a time when tobacco proceeds have increased the supply of forex and when demand is subdued due to the partial lockdown?
In recent days, the Financial Intelligence Unit has descended on EcoCash like a tonne of bricks to rein in the rampant abuse of the platform by currency manipulators for purposes of forex dealings and money laundering that poses a huge security risk for Zimbabwe in terms of international anti-money laundering laws and regulations.
Because this matter is now before the courts, it would be subjudice to go beyond stating the obvious that EcoCash needs to be tightly regulated in the same way the RBZ regulates banks. Money on EcoCash's agent lines is not visible to regulators and thus the need for the standard Know Your Customer documentation to avoid the adverse effects of shadow banking on the Zimbabwean financial system.
For the nine years that it has been operational, the bulk of the transactions are now going through the EcoCash platform, popularised by the convenience it brings to those in the informal sector which now accounts for more than 60% of Zimbabwe's economy.
Whichever way the courts might rule, the judgment will not take away the harsh reality that EcoCash has morphed into a financial institution whose operations must be regularised within a reasonable period to enable the Econet subsidiary to acquire requisite competences and infrastructure expected of a banking institution.
Leaving things as they are can only open the EcoCash platform to shenanigans by currency traders and regime change wolves whose actions now border on espionage.The manipulation of the alternative currency market has sucked in bureaux de change operators, including some of the banks whose staff are abusing their privileged positions to give oxygen to the black market.
To rein in the parallel market, government has tightened the penalty system and unleashed law enforcement agents on black market traders.
The spike in forex rates indicates that the authorities are clamping down on kapenta fish that have no clout to influence rates, leaving out the big sharks to run rings around the RBZ and the Ministry of Finance.
These sharks cannot be called to order in the absence of political will because they have captured some of the influential bigwigs in the political realm who do their bidding for a few pieces of silver while the proverbial Rome is burning.
It is sad that our politicians have become blinded to the point of not seeing that they have a choice of doing the right thing or continue on the titanic journey, which will consume them all if the country's economy continues on this trajectory.
The coming months are going to be difficult for the country's economy, saddled by the impact of Covid-19 and its historical problems that, in the main, can be traced back to the architecture of Zimbabwe's politics whereby wolves and sharks prey on an impoverished population to line their pockets.
This is why all the major deals that have come through, including those that seek to provide mass public transportation and food handouts to the starving people of Zimbabwe are all linked to the few elites that an intimidating political muscle behind them.
To all intents and purposes, Zimbabwe's economic problems lie mainly in its toxic politics fouled by these few elites. Without resolving our political differences, the efforts by the Ministry of Finance and the Central Bank will be futile. In fact, these institutions will end up being thoroughly frustrated to the point of inaction.
The current environment is devoid of the political cohesion called for during a crisis of this magnitude and is therefore not conducive for any meaningful efforts to resolve Zimbabwe's multifaceted economic challenges.
Andrew Lampard is a retired banker who worked in Zimbabwe and South Africa. For views and comments e-mail to firstname.lastname@example.org
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