The Confederation of Zimbabwe Industries (CZI), a business lobby group in Zimbabwe, has warned that the country’s currency could collapse if authorities “fail to implement the necessary policies to support it”.
The central bank approach is destabilizing the market
In a letter seen by Bitcoin.com News, Kurai Matsheja, president of the lobby group, explained that the heavy-handed outlook towards the foreign exchange challenge would destabilize the market. To ensure that this challenge has been fully addressed, the CZI boss stressed that the steps agreed upon by the parties participating in the consultative meeting must be given time to take effect.
After the fall of the Gimdolar in 2008, Zimbabwe became a multi-currency system dominated by the US dollar. However, in 2019 the Zimbabwean dollar or ZWL, which was then equivalent to the USD, was reintroduced.
Yet almost two years later, the ZWL / USD exchange rate is now above 88: 1 in the public market and 170: 1 in the parallel market. Therefore, to stop ZWL’s continued devaluation in the parallel market, Zimbabwean authorities have launched a blitz that has seen law enforcement agencies arrest so-called foreign exchange traders. At the same time, the central bank is blacklisting people who have been accused of making Gimdollar’s misery worse.
However, it was this crackdown on foreign exchange sellers on the black market that prompted the CZI boss to write a letter expressing his organization’s concern with this approach. He said:
We should not arrest people when policies fail, we should amend policies for effectiveness.
He added that the arrests only created unnecessary panic in the market and undermined consumer confidence in government policy.
Dutch auction method
Matsheja, meanwhile, insists that “only a true Dutch auction will accomplish the task of discovering the price and paving the way for a more liberal exchange rate system.” The central bank introduced the auction system as a way to manage foreign exchange allocations.
Nevertheless, some organizations and individuals have complained that it took them months to get their allocations. This long delay forces companies to look for assets in parallel markets where USD is readily available. Although CZI has not yet called for the auction to be closed, Matsheja called on the authorities to ensure that the auction is conducted “in the true spirit of the Dutch auction system”.
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