Zimbabwe’s Mnangagwa takes aim at banks for ‘stashing’ forex

Zimbabwean banks – which include units of Nedbank, Standard
Bank and Standard Chartered – are in the line of fire after President Emerson
Mnangagwa accused finance institutions of “stashing” foreign currency
for speculative street currency dealings, thereby fuelling high inflation
through exchange rate distortions.

Zimbabwe is struggling for foreign currency and has been
unable to pay for key imports such as fuel and medicines. Until now, government
officials have blamed mobile money agents for driving the soaring street
currency trade, which has driven up the parallel market rate for the Zimbabwe
dollar to 1:60 compared to the official interbank rate of 1:25.

Mnangagwa on Thursday took aim at banks, accusing them of
involvement in illegal street currency dealings, and demanding that finance
institutions start to pay interest on Foreign Currency Accounts held by
corporates and individuals. 

“He (Mnangagwa) said he was concerned by the spiking
parallel market rate for foreign currency which he blamed for price increases,”
said a Zimbabwean politician, who attended a meeting of Mnangagwa and leaders
of other political parties that exclude the main opposition MDC Alliance, led
by Nelson Chamisa. “He (Mnangagwa) explained that banks were involved in
the parallel market where they were selling foreign currency at higher rates,
and everyone was surprised to hear this.”

The meeting followed a meeting the previous day between the
Zimbabwean leader and the Presidential Advisory Council, which includes
business leaders in Zimbabwe. Finance Minister Mthuli Ncube this week called
for robust regulation to control the parallel foreign currency market.

This came as supermarkets, manufacturers and other
businesses hiked prices of goods, commodities and services. Mnangagwa’s
spokesperson, George Charamba, tweeted on Thursday that there was a “hierarchy
of misdemeanours” worsening the exchange rate and “price instability”
in the economy.

“Banks have been stashing foreign currency which is
then used in the market to spike exchange rates and prices. Government (has
intensified) surveillance (of banks), and has introduced curbs to daily banking
operations, including forcing banks to award interest on FCAs,” said
Charamba on Twitter.

Zimbabwe has already charged the predominant mobile money
platform, EcoCash, which it alleges is running a Ponzi scheme that is
precipitating the exchange rate; while the central bank has also asked banks to
limit transaction values.

However, the head of operational risk for Fitch Solutions,
Chiedza Madzima, says such controls to plug forex leakages are inadequate.

“Zimbabwe’s government is looking to clamp down on FX
leakages. What the country really needs is proper adherence to existing AML/CFT
controls, stronger anti-corruption efforts and liberalised formal financial
markets + functional FX regime,” she said.