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Business Lobby Warns Currency of Zimbabwe Could Collapse

The Confederation of Zimbabwe Industries, a lobby group representing Zimbabwean businesses, has warned that the country could crash if it fails to “implement policy measures that are needed to support it.”

Central Bank of Zimbabwe Causing Market Anxiety

Kurai Matsheza, the president of the lobby group, explained that a heavy-handed approach to the foreign exchange problem would cause market disruption. CZI boss Kurai Matsheza insists that the parties who attended a consultation meeting must give time for these measures to be fully implemented.

After the 2008 collapse of the Zimdollar, Zimbabwe adopted a multi-currency currency system where the U.S. dollars dominated. The ZWL (Zimbabian dollar) was reinstated in 2019.

Fast two years later, however, the ZWL/USD exchange rates are now at 88:1 on official markets and 170:1 in parallel markets. In an effort to stop the ZWL’s continued depreciation on its parallel market, Zimbabwean authorities launched an operation that saw law enforcement agencies arrest suspected foreign currency dealers. The central bank also blacklisted individuals who are suspected of aggravating the Zimdollar’s problems.

The CZI boss wrote the letter to express concern about the CZI’s operation against black-market foreign currency dealers. He stated:

When policies fail we should not arrest people, we should correct the policies for efficacy.

He said that arrests cause panic on the market and reduce consumer confidence in government policies.

Dutch Auction System for Price Discovery

Matsheza, however, insists that only a “true Dutch auction” would fulfill the function of price discovery. This auction system was created by the central bank to manage the allocation of foreign currency.

However, companies and individuals complain that they have taken several months to receive their allocations. This prolonged delay forced many companies to look for the USD on the parallel market. Matsheza calls for authorities to manage the auction system even though the CZI has not yet called for its end.