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Zimbabwe’s leading industrialists have warned that the country’s currency is in danger of collapsing as businesses resort to US dollar transactions.
This comes after authorities arrested scores of foreign currency traders in recent weeks. They were accused of manipulating the volatile Zimbabwe dollar by trading on the black market.
On the street, the Zimbabwe dollar changes hands for as much as Z$200 per US dollar while the official rate is pegged at Z$90.
The Confederation of Zimbabwe Industries (CZI), the largest representative body for local industrialists, issued a letter to its members saying it had cautioned the government against clamping down on firms and traders.
“The greatest risk facing the economy right now is an inappropriate policy response to the rising parallel market,” CZI said.
“Clamping down on informal exchange trading in the absence of a viable formal market will have catastrophic consequences for the economy...The Zimbabwe dollar is in real peril,” the lobby group added.
President Emmerson Mnangagwa’s government is battling to stop another collapse of the Zimbabwe dollar, which was only resuscitated in 2019, two years after the fall of long-time ruler Robert Mugabe.
The local currency was re-introduced to circulate at par with the US dollar, but it has plummeted in recent months because of a runaway parallel currency market and a shortage of locally made goods.
Finance minister Mthuli Ncube said the government was now moving in to penalise companies and businesses that factored in parallel market rates when pricing goods and services.
“Businesses that disregard the law and continue to price their goods on the parallel market rates will have their licences suspended,” Professor Ncube said in an advisory last Thursday.
Struggling local companies are resorting to discounting prices for those who can pay in US dollars to raise foreign currency for retooling.
The country has since last year been using a dual pricing system where businesses are allowed to sell goods and services in US dollars or the local currency using the official exchange rate.