Black market on the run as Zimbabwe police crack down on currency dealers

Owing to the liquidity crunch affecting banks, the bulk of transactions are now going through currency dealers operating on the parallel market in Zimbabwe.

 

By News24 and Zimbabwe Digital News

 

Police in Zimbabwe have arrested three Chinese men and at least 16 Zimbabweans for illegal currency deals. The arrests come a week after President Robert Mugabe’s government tightened rules to impose heavy jail sentences or fines on offenders and seize their cash.

At least $50 000 in local bond notes was seized from the three Chinese nationals after police were tipped off, the state-run Zimbabwe Broadcasting Corporation (ZBC) reported this week.

Police detectives traced the activities of the accused people and on 3 October they saw the first accused loading his vehicle with sealed cardboard boxes, ZBC said in an online report.

The broadcaster said police had followed the vehicle and intercepted it. When searching it, they recovered $50 000 bond notes. In a separate report, the broadcaster said 16 other illegal dealers were arrested in central Harare “while exchanging various currencies”.

All the suspects have appeared at the Harare Magistrate’s Court on charges of contravening the Exchange Control Act.

Zimbabwe’s banks are critically short of cash – both local bond notes and US dollars. Many retailers are sourcing their foreign currency on the black market to restock their shelves, driving up prices.

Last week, Finance Minister Patrick Chinamasa announced that penalties of up to 10 years in jail, and fines of up to three times the amount of money seized could be imposed on illegal dealers.

Introduced in November last year as part of measures meant to address the liquidity crisis, bond notes have fallen sharply in their value, stirring a wave of massive price increases, especially of basic goods.

Newspapers in Harare reported that the high demand for foreign currencies required to effect payments for goods and services sourced externally has seen the value of bond notes declining by as much as 50 percent on the currency black market.

Though illegal, Zimbabwe operates a three-tier pricing system, which dominates domestic transactions.

This is where a buyer is charged different prices depending on the mode of payment used.

For instance, it is cheaper to pay using hard currencies, while a heavy premium is paid on transactions effected through electronic transfers (including swipe) and bond notes.

Owing to the liquidity crunch affecting banks, the bulk of transactions are now going through currency dealers operating on the parallel market and mostly on the streets.

Because Zimbabwe imports more than it exports, the black market is now influencing pricing trends.

 

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