The hardest working institution in Zimbabwe during the COVID-19 induced lockdown has to be the Reserve Bank of Zimbabwe through the Financial Intelligence Unit. After successfully going for Ecocash Agents and later both Steward Bank and Ecocash parent company Cassava they have now taken aim at the Zipit payment system.

After limiting mobile money accounts to $150000 a month the Zipit platform left anomaly as it had limits of $150000 per day. In a letter to all banks, the Financial Intelligence Unit recommended a downward review of transaction limits on the platform citing a lack of Know Your Customer compliance on the platform. The reality of the matter is the FIU is on a mission to curb the continued depreciation of the Zimbabwean dollar on the parallel market. It was only natural that after going for mobile money agents ZIPIT would become the next best platform. This takes another option off the table.

Zimswitch, which runs the ZIPIT platform quickly responded with a circular to all partners on the platform informing them that limits would be revised downward. The letter from the FIU had recommended $20000 per transaction and $150000 per month. Zimswitch advised banks to limit to $3000 per transaction per day and $150000. The daily limit of course effectively makes the limit $91000 in a 31 day month.

The writing was on the wall when the Reserve Bank of Zimbabwe announced their desire to introduce a Reuters based electronic trading system for the foreign currency interbank market. We believed that such an investment would be followed up with swift action to stamp out the parallel market. The action wasn’t swift, however. Covid-19 reached our lands and put us into lockdown before any real action was taken. The interbank market rate was frozen at 25 and the nation allowed to buy using foreign currency again. This has not helped the Zimbabwean dollar which has lost roughly 65% of its value year to date.

The current limits imposed amount to US$46 per day and US$1400 per month at the prevailing parallel market rate. If we assume the currency depreciation is linear in 5 months that could equal US$16 daily and US$490 per month. The reserve bank seems to have made a clear decision to go for the conduits of the parallel market.

The thrust here may have good intentions but ultimately runs the risk of making the situation worse. Currently, cash is in short supply and people transact via mobile money because it is convenient. If currency depreciation continues, which it is likely to, the reduced limits will continue to tighten. Normally an impediment in electronic transacting would make cash a better option but in our case, it will simply lead to a further premium on foreign currency as the local unit becomes harder to use and move.