- Daily limit revised to a floor of ZW$20, 000
- Monthly ZIPIT transaction value curbed at ZW$100, 000
- The unfolding scenario is a replay of yesteryear casino economics
Harare – In a battle to curb parallel exchange market activities which has seen the black market exchange rate hit above ZW$60 to the dollar, the Financial Intelligence Unit (FIU) has reviewed downward ZIPIT limits to ZW$20, 000 per day and ZW$100, 000 per month. The FIU notes that previously existing limits of ZW$100, 000 per day allows a customer to move about ZW$3 million per month using a single account.
In a letter addressed to Zimswitch Technologies CEO, FIU director acknowledges Know Your Customer (KYC) shortcomings in the ZIPIT system which is making it difficult for regulators and bankers to quickly identify counter-parties to a transaction or to identify multi-banked users. Consequently, Zimswitch was directed to promptly implement daily and monthly limits until adequate safeguards are put in place to reduce money laundering risk.
“The limits have been arrived at cognisant of the reality that very few Zimbabweans earn more than ZW$100, 000 per day, and those who do have other payment options available for higher value transactions” reads the letter. Of recent the FIU have also directed Ecocash to re-register all its agent clients who are involved in bulk transactions as many were accused of abusing the system thereby fuelling parallel market activities. Money changers are using these platforms heavily in their daily trades.
All these actions being taken by RBZ and the FIU are meant to stabilize the local currency which is collapsing on a daily basis. However, there is little activity taking place in the official interbank market to an extent that all economic agents are accessing forex from the parallel market. So whenever the exchange rate goes up, businesses are also forced to change their pricing in tandem with the rate, a phenomenon economists call ‘exchange rate pass-through effect.’
The prematurely introduced currency has significantly shaved purchasing power consequently driving a majority of Zimbabweans into abject poverty. There has been a lack of commensurate production growth to support a spiking base of ZWL money supply and as an implication the currency has demanded more of foreign currency to suit payment of imported goods.
The country is now in a full-blown hyperinflationary mood despite authorities’ projections of single digit monthly inflation and a 50% annual inflation by the end of 2020. It is also vital to note that the country is coming from a 10% recession the prior year which is likely to worsen in the current year due to many factors such as the outbreak of pandemic novel coronavirus which have severely disrupted global supply chains as well as drought among other factors. World Food Programme estimates that nearly 7.5 million Zimbabweans are in need of food aid as current harvest are below 5-year average. The International Monetary Fund (IMF) has branded the nation as being in a state of both “humanitarian and economic crisis.”
It is now crystal clear that the recently introduced local currency will suffer the same fate as its predecessor. The writer holds the view that the problem does not lie in platforms such as ZIPIT and mobile money as history have shown that for any country that has dollarized before, it will take sound market-based economic policies to successfully de-dollarize and this is a process not an event.
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