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George Guvamatanga, Zimbabwe's Secretary for Finance


Illegal forex dealing is money laundering



FINANCE secretary George Guvamatanga says the government plans to criminalise informal foreign currency trading by declaring such dealings as a type of money laundering, as the authorities make frantic efforts to defend the value of the country’s recently introduced currency.


Early this month, Reserve Bank of Zimbabwe governor John Mushayavanhu introduced Zimbabwe Gold (ZiG) after the Zimbabwe dollar which had been ravaged by runaway inflation. At the launch of ZiG, the central bank chief said the new currency would be backed by the country’s foreign currency and gold reserves.

“We tested the market today (Friday) by offering the market US$1 million at the new strengthened ZiG exchange rate because of the increase in gold prices and the market would only take US$784 000 out of the funds that we were offering,” Guvamatanga said.

“They could only pick up US$784 000 indicating that they don’t have the liquidity even to buy US$1 million. So whoever is going to the parallel market  for this rate of 16 or 20, I don’t know why they are going there because there is no need for them to do so. In fact, we should call it what it is because it is an illegality.

“It’s money laundering and, going forward, we are actually going to deal with these activities that we are calling money changing. It is not money changing, it is money laundering and we are going to deal with it as money laundering.”

Barely a month after the launch of ZiG, which opened trade at ZiG13.5 against the US$1, informal market traders began asking for up to ZiG20 in exchange for US$1. This prompted the authorities to embark on a blitz in major cities and towns targeting the traders. This is not new. The government has always arrested currency traders for the same reasons before, from the streets to corporate offices.

Economic analysts say without confidence and trust, as well as key basic characteristics of money like convertibility and acceptability, ZiG is doomed.

For instance in 2018, the police arrested 478 illegal foreign currency traders in one fell swoop amid a sweeping clampdown on dealers.

ZiG has now replaced bond notes and the Zimbabwe dollar which were on freefall amid surging inflation, launched in 2016 and 2019, respectively. Zimbabwe has been struggling with currency and exchange rate volatility — and associated high inflation — for more than a decade now.

ZiG is the country’s sixth attempt to launch a new currency since 2008 when inflation scaled 79.6 billion percent per month before soaring to an unprecedented level of 89.7 zillion percent by November that year, according to the International Monetary Fund.

Other versions of the Zimbabwe dollar include the original local currency, traveller’s cheques, special agro-cheques, bearer’s cheques, bond notes and now ZiG.

Zimbabwe has a long and complex currency history, having experienced hyperinflation amid an economic meltdown in 2008.

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