Zimbabwe cracks down on black market forex trading to support ZiG currency

Zimbabwean authorities have stepped up attacks on the black market for the new currency, which bankers say is starting to bear fruit.

In April, the Reserve Bank of Zimbabwe (RBZ) launched Zimbabwe Gold (ZiG). Backed by $100 million in foreign exchange reserves and 2.5 tons of gold, ZiG is the latest blow to the country’s monetary stability that has eluded it for decades.

ZiG has performed decently against the US dollar on official channels, gaining 1.9% since its April debut, a stark contrast to its predecessors.

However, some old challenges resurface and worry the new currency. One of them is black market Forex trading, which the authorities intend to clamp down on.

Last month, the RBZ led a multi-agency crackdown on black market traffickers. This led to the arrest of over 200 illegal Forex traders across the country. The central bank’s Financial Intelligence Unit (FIU) also froze nearly 100 accounts and fined 40 people for their involvement in the trade.

The FIU claimed that its crackdown had led to “a significant decline in the number of illegal money changers operating in the Central Business District (CBD) and surrounding areas.”

Commercial lenders also say they have seen an increase in forex trading volumes on official channels.

“The parallel market is not as loud and visible as it was before the last attack,” said Lawrence Nyazema, president of the Zimbabwe Bankers Association.

The FIU pledged to continue its actions and urged the public to report any illegal currency dealers or sellers who refuse to accept the new currency.

However, the commitment to enforce the use of ZiG faces a major challenge: some government departments still refuse to adopt the new currency and insist on the US dollar, which a South African economist described as “behaving like someone who lives on takeaway food but wants others ate the food they cook.”

Another challenge was the insufficient supply of ZiG banknotes and coins. While RBZ launched physical cash in May, Zimbabweans have to queue for hours to access it.

To address this issue, RBZ announced this week that it will use its subsidiary Homelink to offer access to lower denominations of ZiG, including ZiG1, ZiG2, ZiG5 and ZiG10. The bank is holding back on issuing larger denominations to stifle the black market and force citizens to flock to banking halls.

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