Latest News Editor's Choice


Opinion / Columnist

Mnangagwa to do a Narendra Modi on Zimbabwe black market?

11 Oct 2018 at 18:17hrs | Views
There are whispers the President Emmerson Mnangagwa will come hard on the black market with some saying he will do what Indian Prime Minister Narendra Modi did in India in 2016. The secrecy with which this demonetisation scheme was planned and carried out by government and Reserve Bank of India officials was remarkable. Without the surprise element, the tax evaders, gangsters, counterfeiters and corrupt politicians whose cash hoards were targeted could easily have exchanged notes for gold, diamonds or property - where ill-gotten gains tend to wind up.

Uncertainty hangs over the future of bond notes and real time gross settlement (RTGS) transfers, as more businesses are rejecting the two payment methods and the economy is effectively re-dollarising. It is nnot clear how Mnangwa will do a Modi, will he ped the bond notes in banks at 1 to 1 to the dollar and go after those hoarding bond notes outside the banking system?

What did Modi do?

The Indian Prime Minister Narendra Modi announced that the 500 ($7.60) and 1,000 rupee banknotes will be withdrawn from the financial system overnight.

The surprise move, announced in the evening, was part of a crackdown on corruption and illegal cash holdings.

Banks were ordered to close on the following day and ATM machines were not be working.

India is overwhelmingly a cash economy. New 500 and 2,000 rupee denomination notes were be issued to replace those removed from circulation.

"Black money and corruption are the biggest obstacles in eradicating poverty," Mr Modi said.

People will be able to exchange their old notes for new ones at banks over the next 50 days but they will no longer be legal tender.

The announcement prompted people across the country to rush to ATMs that offer 100 rupee notes in an attempt not to be left without cash over the next few days.

The move was designed to lock out money that was unaccounted for - known as "black money " - which may have been acquired corruptly, or be being withheld from the tax authorities.

Finance Secretary Shaktikant Das warned people with large stashes of hidden cash that banks would closely monitor the exchange of old notes for new ones.

The move was also unprecedented in scope. The old 500 and 1,000 rupee notes - worth $7.50 and $15 respectively - accounted for around 85 per cent of all cash in circulation. To avoid a run on the banks, strict limits were imposed on the amount of smaller notes still in circulation that can be withdrawn. In an economy where most transactions take place in cash, the level of disruption is immense. The poor are hit far harder than the rich, who have credit cards and live in places where shops accept them.

From a political point of view, the logic was nevertheless easy to follow. Not only was this attack on the black economy surprisingly popular. It also wiped out illicit cash piles hoarded by the ruling party's opponents ahead of an election.

Join Bulawayo24 Online Community
Source - Ndoro Tafadzwa
All articles and letters published on Bulawayo24 have been independently written by members of Bulawayo24's community. The views of users published on Bulawayo24 are therefore their own and do not necessarily represent the views of Bulawayo24. Bulawayo24 editors also reserve the right to edit or delete any and all comments received.

Subscribe

Email: