After selling up to $20 million in U.S. cash to banks to trade on a new forex interbank market, Zimbabwe’s central bank is now running out of dollars because of the high demand.
The country has been dealing with a severe cash shortage that has caused shortages of medicines, fuel and food. While citizens had expected to be able to acquire U.S. dollars from local banks, financial institutions have been ordered to limit transactions to those with foreign payments in an effort to boost economic growth, according to a directive from the Reserve Bank of Zimbabwe (RBZ) that was seen by Reuters.
The central bank sold what it called “seed” U.S. dollars to some banks last week. Although RBZ Governor John Mangudya and Finance Minister Mthuli Ncube refused to disclose the amount, one bank executive revealed that “they sold between $15 and $20 million to the banks,” adding that it “will be exhausted by the end of next week, and that is when reality will kick in.”
Another bank executive confirmed the amount, saying “the problem is that there is huge demand, but no one is selling, so we will run out pretty soon.”
Last week, the central bank decided to end a 1:1 dollar peg for surrogate bond notes and electronic dollars, combing them into a lower-value transitional currency called the RTGS dollar. On the black market, $1 bought 3.6 RTGS, with dealers claiming that the central bank did not want the rate to move beyond 2.5 for now.
RBZ says it ended the 1:1 dollar peg to benefit exporters who can now sell part of their U.S. dollars at the 2.5 rate, but can only keep the cash in local foreign currency accounts for 30 days before they must sell on the interbank market.
But some analysts say that if the country truly wants to lure foreign investment, exporters should be able to keep all their dollars and only sell when needed.
“This is not much of a currency reform. They just merged the RTGS (electronic dollars) and bond notes and devalued the exchange rate, but everything remains the same,” said Tony Hawkins, professor of business studies at the University of Zimbabwe.