Economic analysts say the government is panicking and arresting forex dealers over unrelenting currency problems is just a scapegoat for grand policy failure.
This comes as President Emmerson Mnangagwa’s government has intensified its sweeping crackdown on foreign currency traders in the volatile market, amid growing fears of an exchange rate-driven economic meltdown.
The government has also moved to arrest business leaders buying foreign currency on the parallel market, a move that has been met with outrage from the business community, including the Confederation of Zimbabwe Industries (CZI).
The Zimbabwe dollar continues losing ground against the US dollar, with the official exchange rate weakening from US$1:ZW$88.55 to US$1:ZW$90.07 this week.
On the parallel market, the rate ranges between US$1:ZW$175 and US$1:ZW$200.
Speaking in a recent interview with The NewsHawks, economist Tinashe Kaduwo said:
Blaming businesses for currency instability and suspending their operations appear to go beyond the stated aim of economic instability but just finding a scapegoat.
To note, the increasingly repressive stance adopted by the government in recent months reflects the growing political pressure it is facing in the wake of these challenges.
Kaduwo said the government had a checkered history of dealing with currency policy and cannot defy the laws of economics.
From the country experience on currency and foreign exchange rate, it is clear that there is no escape from the laws of economics.
Large budget deficits are always unsustainable, and, if financed by printing money, will result in inflation and currency depreciation.
Furthermore, if the economic fundamentals are wrong, then the choice of currency regime is irrelevant as both dollarisation and a local currency will fail, regardless.
Zimbabwe, just like any developing country, is dependent on capital inflows which, in turn, need a positive business environment (for inflows of foreign direct investment) and debt restructuring as Zimbabwe’s debt is unsustainably high.
He added that the central bank’s monetary policies since the adoption of the local currency had continued to militate against the local unit. Said Kaduwo:
It is also clear that the central bank’s numerous changes to monetary policy over the past few years indicate its ongoing inability to strengthen the local currency and reduce hyperinflation.
Meanwhile, it is targeting of private businesses signals that it is seeking to scapegoat external actors for the country’s macro-economic challenges.
Businesses, however, will face an increasingly hostile environment for their operations amid growing uncertainty around the security of their investments.
Former Finance minister Tendai Biti predicted that the parallel market will spiral out of control as the year hurtles towards the end.
He urged the government to fully dollarize the economy to deal with rent-seeking behaviour by elements that take advantage of a crisis.