Closure of bureaus de change partly responsible for cash shortage?

Theories about the current shortage of local cash continue to abound. Initially, the central bank was said to blame for not accurately predicting inflation and thus not injecting enough cash into the system. Now it is cross border traders who have reportedly stashed millions of near worthless Zimbabwe dollars outside the country.

But according to one respected economist, the closure of bureaus de changes is largely to blame not just for the current cash shortage but for the fuel crisis as well. The economist argues that the closure of bureaus de change in November last year, saw the flow of foreign currency to the central bank trickle down from highs of as much as US$18.5 million a week in September to US$500 000 in December.

The situation has not improved. Current inflows are around US$600 000 a week. This is despite the fact that the government has reviewed the exchange rate to $800 to the greenback and requires companies to surrender half of their export earnings to the central bank.

The economist argued that though some of the bureaus de change were operating outside their parameters, as least they still surrendered enough to the central bank to ensure that the country was able to meet its fuel and electricity import requirements. Now, the country is unable to earn even enough foreign currency to print local money.

The economist who was a participant in the Tripartite Negotiating Forum and has done several consultancies for the World Bank said the closure of the bureaus de change had not shut down their operations. It had merely shifted their operations from open enterprises to backdoor enterprises.

The February devaluation has failed to stem the free fall of the Zimbabwe dollar which has been trading at around $4 000 to the greenback. Some reports have quoted the dollar trading at as low as $5 500 to $6 000 to the greenback.

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