The Financial Intelligence Unit is showing no signs of abating in its fight against the parallel despite results showing they have only accelerated the depreciation of the Zimbabwean dollar. When the Reserve Bank of Zimbabwe and the Ministry of Finance and Economic Development made a joint statement on currency measures back in March we pointed out that Zimbabweans should expect two things; an attack on the parallel market and an attack on those who publish parallel market foreign currency. After seeing the former play out over the lockdown period it is now time for the latter as the latest communication from the Financial Intelligence Unit announces they will be going after individuals who publish rates for trade in foreign currency.
The statement specifically mentioned people publishing rates in WhatsApp groups as a platform of interest. The FIU will work in conjunction with the police, PORTRAZ, mobile networks, mobile money providers and other relevant authorities to weed out these elements and take action against them. The wisdom of this move is not clear to many, all moves made so far have proven to fuel the parallel market to higher highs.
This coincidentally published just a few days after the Reserve Bank released a Reserve Money update for June 2020. The document delivers the good news that Reserve Money or M1 money supply has been within the growth target of 15% for the first quarter of 2020. However, the table used to present the data is rather disturbing as it uses monthly measure for the first 4 months of the year the suddenly switches to the week ended May 29 and weekend ended June 4. Perhaps there’s more to this report than meets the eye. Of course many are of the school of thought that money supply growth is the cause of both currency depreciation and inflation in Zimbabwe. This I suppose is the Reserve Bank taking time out to refute that while they continue their assault on perceived enemies.
The statement from the FIU also contained a list of penalties for those caught committing these offences which including the blocking of mobile phone lines, freezing of mobile money accounts, freezing of bank accounts and further investigation by authorities. The penalty for illegally dealing in foreign currency still stands at 10 years in jail.
When the RBZ announced a plan to ambush foreign currency dealers we all wondered why they would announce such a move. Now that they have done it again we can see there is a method to the apparent madness. When I said they will go after rate publishers this is the action I envisioned back then in March. Social media and the internet have not caused the black market by any stretch of the imagination. We had a strong and thriving black market in 2008. What they have brought to the parallel market is information efficiency which has surely irked authorities. Information efficiency of a market is a strength and if you compare with their currently frozen interbank market it’s easy to understand.
The plan here is to drastically slow the ease with which rates are published. This would take away some of the strength of the parallel market. However, a plan to remove something without creating a better alternative will likely not succeed.