Zimbabwe’s first strike against its citizens has been the ban of mobile money platforms to prevent the further fall of the country’s local currency that continues to lose its value. The move has left users stranded as a huge portion of transaction flow through mobile money platforms in Zimbabwe because of long-term cash shortage at the banks.
The country is already suffering from escalating inflation with a shortage of foreign exchange. Just last year, the country banned the domestic use of foreign currencies and reintroduced the Zimdollar which crashed after hyperinflation and use of the US Dollar in 2009.
The market is now re-adopting the US dollar and the Zimdollar is losing ground, falling more than 100% in less than three weeks.
The monetary and economic uncertainty in recent years has forced Zimbabweans to switch from cash to using mobile money. With mobile wallets now accounting for 84.8% of all transaction volumes.
Stock Market Also Shut Down
The central bank governor, John Mangudya however says that they have sufficient currency reserves to sustain the reintroduced foreign currency system. “It’s about sufficient resources and utilization of resources,” said Mangudya.
However, some say this new system will only accelerate the collapse of the local currency. “Some of the things that have exacerbated this have been the measures taken by the Reserve Bank, in particular the restrictions on electronic transfers, mobile money and the restriction of real-time gross settlement transactions,” said former finance minister Tendai Biti.
Stock traders are other victims of the government's desperate efforts to stem the plunge in their local currency.
On Sunday, the Zimbabwe Stock Exchange announced that it suspended trading to comply with a directive issued by the Information Ministry after banning the ability of traders to buy shares of dual-listed companies.
The benchmark industrial index of the country has risen over sevenfold this year.
“People are looking at a hedge against inflation; that’s why they are switching from Zimbabwe dollars to equities,” said Lloyd Mlotshwa, head of equities at Harare-based IH Securities. “The stock exchange serves as a proxy to parallel market rates.”
Bitcoin Demand on the Rise
The biggest platform EcoCash has been accused of driving the spike in the street exchange-rate of the Zimdollar versus the US Dollar by the government.
The govt. said in a statement that it “is in possession of impeccable intelligence” which shows “mobile money systems of Zimbabwe are conspiring, with the help of the Zimbabwe Stock Exchange, either deliberately or inadvertently, in illicit activities that are sabotaging the economy.”
"Ecocash is acting as the centre pivot of the galloping black market foreign exchange rate therefore fuelling the incessant price hikes of goods and services that are bedevilling the economy & causing untold hardship yo the people of Zimbabwe."
Ecocash destroyed the economy?👀 https://t.co/InOeBNWHDB
— Fadzayi Mahere (@advocatemahere) June 26, 2020
EcoCash is commonly used to buy Bitcoin and is seeing a high demand for the leading cryptocurrency that has its prices jumping 18% the market rate in Zimbabwe, reported Bitcoinke. The same thing happened a year back when the country banned the use of US dollars.
EcoCash is defying the government order to suspend transactions saying only the central bank could order such a suspension.
“We urge all Ecocash users . . . the majority of whom do not have bank accounts, to remain calm and continue to do your lawful transactions as usual,” the company said.