Zimbabwean president Emmerson Mnangagwa has resorted to the use of temporary powers to deal with illegal currency traders as the southern African country continues to experience crippling foreign currency challenges.
Under regulations that come into effect this Monday, the Zimbabwean authorities will track unexplained movement of money in the financial system.
Those caught on the wrong side of the law, will be sentenced to ten years in jail, while “ill-gotten wealth” will be confiscated, it was announced.
The move by Mnangagwa to resort to the country’s Presidential Powers (Temporary Measures) Act comes at a time cash is circulating outside formal channels.
While central bank authorities insist the US dollar is on par with the local bond notes (Zimbabwe’s surrogacy currency), illegal foreign currency dealers have been using a ratio of one American dollar to an average of three bond notes.
Pharmacies, also failing to access foreign currency from normal banking channels, are now asking for US dollars or five times the amount when customers are using plastic money.
Mnangagwa’s temporary measures can be in place for six months. Within these six months, Parliament can use its powers to make the law permanent, Secretary for Justice Virginia Mabhiza was quoted as saying by state media.
Analysts, however, say Zimbabwe will continue to face foreign currency challenges for as long as productivity is very low.
“We import more than we export, that’s challenge number one. Then government also spends more than it earns, thus creating a fiscal deficit, which unfortunately is funded by financial instruments that are not backed by foreign currency.
“So unless we solve our fiscal deficit, we can introduce new laws, but foreign currency will remain a challenge to business,” said local analysts Walter Mandeya.