Home Business Zim shuts down the main source of hard currency

Zim shuts down the main source of hard currency

Fired Old Mutual CEO

Zim shuts down the main source of hard currency. Zimbabwe reintroduced a currency, the Zimbabwe dollar, last June, ending a decade of dollarization. But with no foreign or gold reserves to back it up, its value has plunged while inflation soared to an annual rate of 540.16% in February.

Zimbabwe has suspended the transfer of local shares in dual-listed companies to foreign bourses, one of the main ways citizens and businesses have been able to obtain dollars as inflation wipes out the local currency.

Foreign and Zimbabwean investors aiming to obtain foreign currency have been buying shares in Old Mutual (OMUJ.J), Pretoria Portland Cement (PPCJ.J) and SeedCo (SEED.ZI) SCIL.BT on the Zimbabwe Stock Exchange and selling them on foreign exchanges.

Old Mutual and PPC are listed in Johannesburg while SeedCo is also listed in Botswana.

In a government notice on Sunday, Finance Minister Mthuli Ncube said the practice had been suspended for 12 months. The national treasury said this was “part of broad and bold measures to weed out some of the visible sources of currency instability.”

The Zimbabwe dollar was officially trading at 18.4283 to the U.S. dollar on Monday and at 40 on the black market. Many investors use what is known as the Old Mutual Implied Rate (OMIR) to asses what they say is the true value of the local currency.

This compares share prices of Old Mutual in Harare and in Johannesburg to determine the exchange rate. The OMIR was at 60.77 on Friday, according to currency tracking website MarketWatch.

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In 2008 at the height of hyperinflation, Zimbabwe also suspended the transfer of dual-listed shares but this did not stem the crash of the local currency.

Source – Bulawayo24 News

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