The Reserve Bank Of Zimbabwe has announced (through their Twitter) that they will be drawing down on a US$500 million fund to supply the Interbank foreign currency exchange market on the 20th of May.
What does this solve?
The Interbank forex market was created in order to tame the black market but thus far it’s failed woefully. The thinking behind the creation of the Interbank market was that as long as it could quench the demand of the forex, the black market rate would be forced to compete with it and thus remain low or marginally higher.
For a while, this worked but the reality is that the Interbank forex market doesn’t have forex. Delta CEO Pearson Gowero admitted as much in a recent NewsDay piece:
There is now an interbank market, so anybody that required forex should go to the interbank market. But, what is clearly happening is that the interbank market doesn’t have enough dollars for everybody. We have participated there. I do not have the numbers, but we are not getting as much as we would like.Pearson Gowero, Delta CEO
This makes the Interbank “rate” similar to the “1:1” rhetoric we heard for the better part of a year. A make-believe tool used by the government to try and mask some of their inadequacies. Unfortunately, over the past few weeks, the rate has spiralled out of control and panic has increased leading to this drawdown.
Where is the money coming from?
Some of the questions many of us have are pretty simple. Where was the money all along and why wait until things have gone to the dogs to inject it into the economy?
Well, here’s what the Finance Minister has to say about that:
The US$500 million new facility raised from international banks will increase the supply of foreign currency for imports, for industry and other sectors.Mthuli Ncube
The statement has many questioning just how true the RBZ’s claims are. Back in April, StanChart was fined US$18 million for just for handling transactions for state-owned firms and sanctioned individuals.
By now it’s a known widely that ZIDERA makes it nearly impossible for Zimbabwe to access new funding or debt relief from the World Bank, the IMF or any multilateral finance institution where the US has influence. Maybe they got it from somewhere else…
As with most promises made by government in recent times, tomorrow will arrive and the impact of the US$500 million draw down will be there for all of us to see…