The country’s parallel foreign currency exchange market is likely to be dominated by cash transactions, following the introduction of ZIPIT limits by the Reserve Bank of Zimbabwe (RBZ) this week, which makes it less attractive for players to transact electronically.
ZIPIT (ZIMSWITCH Instant Payment Interchange Technology) is a platform that enables instant inter-bank funds transfers between ZIMSWITCH member institutions – banks and wallets connected to the network.
Forex dealers have been utilising the platform, which monetary authorities say has been difficult to monitor, to buy hard currency from their customers.
Transaction limits were all along pegged at ZWL$100 000 a day and ZWL $3 million a month until Thursday when the RBZ’s Financial Intelligence Unit (FIU) reviewed them downwards.
ZIPIT transactions are now limited to a total ZWL$$20 000 a day and ZWL$100 000 a month, a move the central bank argues is aimed at stopping large transactions on the foreign exchange black market.
The new directive by the apex bank comes hard on the heels of the recent freezing of mobile money agent accounts also fingered in the illegal foreign currency deals.
One forex dealer in Bulawayo told CITE they had fallen on hard times, adding the tumbling of rates could not be ruled out.
“Rates will fall; we can’t work at this limit,” he said.
Currently, US$1 is equivalent to ZWL 41 or more in cash and ZWL$53 or more electronically depending with dealers.
A fall in electronic rates will mean traders will prefer cash instead, driving the country back into a cash economy, considering much of the activity is in the informal sector.
Morris Mpala, a business analyst and managing director for MOB Capital, a microfinance institution, said forex dealers will remain in place despite the new development.
“The market (parallel) will go underground and mutate into a black market with no traceable lines,” he said.
“The reason being the official interbank market is not attractive for those with foreign currency.
He said the government-fixed exchange rate of US$1: ZWL 25 against was less competitive compared to rates on the black market.
“The premium on cash transactions will go up and more trade will be conducted over that front,” said Mpala.
He added there could now be a premium to accommodate the delays in getting value for cash for those that would want to use the traditional route of using bank RTGS.