Fresh blitz on parallel market

The Zimbabwean government was considering scrapping the export retention scheme and forcing all foreign currency account (FCA) holders to trade at the official exchange rate in yet another desperate attempt to quash a thriving parallel market for hard cash, the ‘Financial Gazette’ reported on Thursday.

The new measures were understood to have already been communicated to Zimbabwean bankers and industrialists at a meeting called by Finance Minister Simba Makoni and the Reserve Bank of Zimbabwe (RBZ) on 6 September, the report said. It quoted officials as saying that the cabinet was keen to see the measures implemented to curtail the inflow of funds into the parallel market and to improve the supply of foreign currency into the official market. One of the measures being mooted was doing away with the arrangement whereby FCA holders were allowed to sell their hard currency at parallel market rates.

“But there seems to be no consensus at the top government level on how to compensate the FCA holders, with some arguing that such measures would have to be accompanied by a devaluation to encourage people to bring their foreign currency into the country,” one source was quoted as saying. The government was also understood to be considering doing away with the export retention scheme under which indirect exporters such as gold producers and tobacco farmers were allowed to keep part of their proceeds in foreign currency, the report said.

This would see the government taking away everything exporters brought into Zimbabwe and placing it into a single pool to finance fuel, electricity and other imports. “Exporters would get a certificate of entitlement as proof of exports and would draw against this each time they want to use foreign currency,” one industrialist who attended the meeting said. The planned crackdown on the parallel market is the latest in a spate of measures by the government to curtail the parallel market.