Forex crisis: Zim comes full circle

THE more things change, the more they remain the same, it appears.

On September 10, 2008, the governor of the central bank at the time, Gideon Gono issued a laden exchange control statement that was soon to become the stuff of legend, and added to a growing Zimbabwe lexicon of the apex bank’s quasi-fiscal activities.

As part of its “pragmatic interventions”, the bank launched foreign exchange licensed warehouses and retail shops (Foliwars), foreign exchange licensed oil companies (Felocs) and the foreign exchange Licensed outlets for petrol and diesel (Felopads).

The bank’s move was part of a stubborn refusal by government to accept the obvious; that the local currency had become valueless paper ravaged by inflation and that the market had moved to more stable currencies such as the United States dollar and the South African rand. Inflation would close the year at 500 billion percent according to the International Monetary Fund, writing the final epitaph on the Zimbabwe dollar at the time.

Zimbabwe has certainly come full circle.

Incumbent RBZ governor John Mangudya — never the most articulate of men, has stayed off mind-bending acronyms that defined the tenure of his predecessor — last week announced during the 2020 Monetary Policy Statement that companies and individuals with free funds were free to seek permits to import fuel and sell in forex.

So, we are back to the 2008 situation; a struggling local currency being ravaged by rising inflation and shunned by the market, a stubborn government refusing to acknowledge the obvious fact that its ill-advised experiment to rush back the Zimbabwe dollar had backfired spectacularly, leading to widespread shortages of key commodities.

So Mangudya brings back Felopads without the acronym just because the government is refusing to listen to the market to act on the currency chaos which it has created.

A discussion with senior monetary authorities last week was enlightening. Basically, they said personal greed and corruption by senior administration officials and their handlers — read cartels — were behind the move to introduce a local currency prematurely. Now they can manipulate the system at will and bend the economy to their greedy desires.

That is why the RBZ governor can say without shame that only 200 depositors owned over 80% of bank deposits of $34,5 billion. The capture of key State institutions is complete, corruption is king.

That is why Zuva Petroleum on Tuesday last week, a day after the monetary policy was made, announced that eight of its service stations were now selling fuel in foreign currency.

Days later, after loud objections from other players in the industry, the central bank and the Zimbabwe Energy Regulatory Authority have said that those companies seeking licences to import and sell fuel in foreign currency must demonstrate that the funds with which they plan to use to import the fuel are “legitimate”.

The RBZ also said it “will be fairly sparing with forex licences looking at the geographical spread of forex stations”.

No effort has been made to explain how Zuva, a company associated with the ruling Zanu PF party bigwigs, was allowed to operate eight foreign currency service stations.

One rule for the elite and another for the rest. Zimbabweans are not fools, but the authorities have fooled around long enough.

This was originally published here by the News Day