Ngarivhume says ban on forex will further destroy the economy

The ban on forex by the ED regime is an ill advised move, a sugar cotted plot to swindle all the forex in the nation and land it in the hands of cartels who seem desperate to destroy the country. The move will completely destroy the economy sooner rather than later. The haste decision was made without thorough consultation but it was an end to the means of telling people that the government cares about no one. A single currency is not wrong but the finance Minister just applied a bandage on a septic wound without any anti-biotics. Issues that led to the multi currency were not addressed and that ommission will fertilise the local currency and promote it to hyper inflation and empty shops.

The government through its reckless expenditures which include hiring expensive jets for ED, purchasing fancy vehicles for officials and purchasing useless USD$1000 police uniforms, has drained the foreign reserves it had access to.

Because Zim is currently an unproductive nation, there is no export earnings or capital inflows into the nation, which means real forex supply is dropping by the minute. The only forex flowing into the nation is in the form of remittances by friends and relatives to their loved ones in the nation.

The government now wishes to use this instrument to force Zimbabweans to cash in their forex for RTGS a.k.a Zimbabwe dollars. Whether you do it through the blackmarket or bank is of no consequence, either way, one way or the other the money will end up in their hands. They will harvest every single forex in the nation to fund their reckless and impulsive expenditures.

Because this policy was so abrupt, panic and fear caused the unsuspecting and stranded citizens to sell their forex to meet their day to day expenses, which by laws of supply and demand naturally caused the exchange rate to drop. But this is only temporary, a mere calm before the storm. The real effects are yet to be seen.

The main reason business were now transacting in USD is to simplify their access to forex which is essential for their sole survival as it enables them to meet their international obligations which include paying their suppliers for raw materials and in the case of shops, purchasing new stock to meet their customers demands.

With this new law, the government has created a serious bottleneck in the businesses access to forex, which will sooner rather than later reflect in the businesses performance.

The businesses demand for forex will not decrease by being forced to sell in Zim dollars, they will still demand forex to purchase new stock and raw materials.

In addition, though the Zimbabwe Dollar may work as a means of exchange and unit of account as a currency should, the Zim Dollar fails miserably on the 3rd and most important function of money which is being a good STORE OF VALUE.

This alone means that even after business transactions, a business or person who wishes to preserve his/her real income will do so in a currency which is a good STORE OF VALUE, and in Zimbabwe this can only be done through forex.

So forex will continue to be on demand, but because of the new law it will be in much lesser supply than it was. The RBZ will not be able to meet the forex demands of business as is already the case, which will leave the blackmarket as the only source.

All these factors coupled with the laws of demand and supply will sooner rather than later see exchange rate rising way highier than they were before. The foreign exchange blackmarket will grow, and there will be no limit in the rise of the exchange rate.

Businesses that shall fail to meet the blackmarket rates to purchase sufficient forex for continued business operation shall soon find themselves out of business, which raises risk for chronic shortage of essential commodities within the nation.

Our advice to the nation in this light is to hold on to your forex if you can. Change only that which is necessary for your immediate need and preserve the rest. Families should also gather as much household basic commodities as their resources permit to guard against the looming shortages. If possible, for those with access to diasporan remittances, it is even better to have part of the money to be sent in form of basic food stuff and toiletries.

In conclusion, the failure of Zimbabwe is the failure of leadership. The short sightedness of this regime will land Zimbabwe in a greater economic quagmire than we have now. Nothing positive can be genuinely expected of this policy for the people of Zimbabwe.