Zimbabwe's parallel forex market collapsing

SABC News (SA) ^ | January 19, 2004

[Clive]

The parallel forex market in Zimbabwe is collapsing, following the introduction of the new auction system, where banks trade their forex in an open system at the central bank. Most major currency rates have taken a major knock in the market and this is helping to enhance foreign currency inflows.

When the greenback sneezes and takes a knock on the new auction system, the parallel market catches a cold. Over the past week, the new auction system has seen major currencies trading for a lot less, with one US dollar fetching just over 4000 Zimbabwe dollars, from a high of almost 8000 less than a month ago. However, it is the rand that has been hardest hit - dropping from 900 to 500 Zim dollars in under a week.

Zimbabwe has been losing about two and a half million US dollars on the black market recently. Analysts say the new monetary policy measures announced by the central bank should ease the country's foreign currency crisis.

With speculation on forex almost gone, the havoc it caused on the economy is likely to remain a telling reminder that fixing rates can take their toll on an economy. In the past, the Zim dollar was pegged at $824 to the greenback. Now it is an open auction market operating where the ruling rate rules.

[Clive]

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[kazatzkeh]

Oh well, Zimabawe formerly known as rhodesia was the wealthiest of the african countries, too bad for them that their leader(if u can call him that) decided that those that know how to run agricultural farms AKA white people need to be removed. As if farms just grow all by themselves!! fools

[blam]

Zim bump.

[cyborg]

The Zim dollar is going to bottom out the way the germany mark did leaving Germany rip for a taking over. This is communism at its best.

[JasonC]

The reason the domestic currency is strengthening compared to the previous black market rates is simply because it is now legal to trade it. A currency that can be legally converted at any kind of market-set rate is inherently more useful and therefore more valuable than one that can't be.

Also, the old prohibition combined with an artificially high rate announce to the world a policy to print monopoly money and pretend it was worth something, and thereby steal from anybody forced to use the official system. The present move to allowing trading, in contrast, suggests the government will be forced to exercise some restraint in its printing operations - since otherwise the free market price will just drop like a stone again.

Now that it is legal to trade the currency, think they might take the next step and make it legal to produce anything domestically? Or will robbers still be given all the productive assets of the country, which of course robbers have no intention of actually working to operate?

[Cincinatus' Wife]

Bump!

[Conspiracy Guy]

I had to write this this morning. The names Zimbabwe and Mugabe crack me up. Nothing funny about what's going on with the people but this little poem was therapy for me.

Can’t help it

There is a problem I’ll address,
The problem it’s with me.
I can’t stop laughing when I read,
That funny word, Zimbabwe.
Mugabe makes me laugh out loud,
Imagine, first name's Robert.
The strife there is not funny though,
Mad Bob should be clobbered.
I’ll pray each day they take this pig,
And put him in the ground.
Zimbabwe will be better off,
When Robert’s not around.

Conspiracy Guy 1/20/04

[Clive]

Well said.

[Conspiracy Guy]

Thanks.