RBZ Soon to Promote Forex Trading, Curb Black Market
The Reserve Bank of Zimbabwe (RBZ) eased the rules concerning opening bureaux de change in a move that is seen to help develop a formal forex trading industry in the nation while placing curbs on the growth of its informal currency trading market. The black market in foreign exchange trading has seen a sharp rise after the central bank introduced bond notes in 2016.
RBZ’s Move Welcomed
The RBZ’s move has been welcomed by industry analysts who say that this will boost local confidence in formal channels, eventually weakening the black market. Prosper Chitambara, a local economist pointed out that people will prefer buying currency via legal channels as long as the cost of doing so is reasonable. However, he also pointed out that the country’s black market was well entrenched and unlikely to be troubled by the RBZ’s action. He said that the informal nature of the economy would have to be addressed.
The measures taken by Zimbabwe’s central bank are an important initial step towards managing the foreign currency market which currently operates without much regulation all over the continent. Foreign currency traders in Nigeria and Tanzania make use of loopholes in the law as well as corrupt practices to carry on their business, thereby depriving their respective governments of much-needed revenues.
RbZ’s Expectations from Individuals and Businesses
RBZ has called for individuals and businesses to register as bureaux de change and has also made it easier for them to do business. The central bank said that it aims to bring about financial inclusivity and also increase the level of participation in the industry. The country has very few bureaux de change as of now, even in urban areas. What’s more, official bureaux de change services are in short supply in the country’s ports of entry or exit. The bank’s intention is to provide citizens as well as outsiders formal currency exchange services.
Zimbabwe has been a hard currency economy after it discarded its currency in 2009 in order to rein in hyperinflation. However, the country has suffered serious cash shortages after that, with US Dollars being in particularly short supply. The central bank responded to that by introducing bond notes, but this has only served to strengthen the foreign currency market. As a matter of fact, the acute shortage of foreign cash has pushed businesses and individuals towards the black market.
RBZ’s Ban in 2002
It is worth pointing out that the RBZ had banned bureaux de change in 2002 from operating in the country because of their role in promoting the black market. They were eventually permitted to start operations in 2009. Many of the companies that reopened were not able to generate enough revenues to justify staying in business.
A banker who did not wish to be named said that the latest measure by the RBZ would not have a major impact on the forex business undertaken by commercial banks. He pointed out that bureaux de change did not have a major impact on the currency market as of now.
The RBZ will have to face major problems reining in the foreign currency business, given that many bureaux de change are believed to be occupied in money laundering. These companies have been accused of offering wrong exchange rates and also undercutting the formal sector which has to pay taxes.
Little Faith in Official Banking System
There is very little faith in the official banking system in the country, with the average Zimbabweans choosing to keep money at home or in the informal banking sector because of lack of confidence in the official system. Zimbabwe has joined the Eastern and Southern Africa Anti Money Laundering Group, and will, therefore, be expected to take the appropriate steps.