The ZSE (Zimbabwean Stock Exchange) has been closed and mobile money payments have been banned in Zimbabwe to curb the decline in value of the Zimdollar. The leading provider Ecocash has rejected the ban as millions of people depend on their service. The government argues that payments platforms have allowed the formation of uncontrollable black markets which are pushing the currency towards collapse. The black market rate is $1:95ZWL, nearly double the official rate of $1:57ZWL!
Businesses and street traders are now only accepting foreign currencies such as the pound and the dollar. You can imagine a company which sells products in Zimdollars but buys its products in US dollars will be put out of business if it does not begin to take payments in a stronger currency. The devaluation combined with business re-dollarization has triggered Zimbabweans to get rid of their Zimdollars in exchange for a stronger currency. The government’s fear is that the Zimdollar becomes worthless and they are forced to re-adopt the US Dollar to sustain their economy.
The fact that Ecocash was able to say no to the government highlights how much emerging market economies rely on Fintech. 80% of transactions in Zimbabwe are done through mobile payments with working and middle-class people relying on them to pay bills, receive remittances and get paid. A ban on mobile payments is definitely not the long-term solution. Mobile payments have such a strong hold in the country’s flow of money that the government would be better of looking for ways to share data and collaborate with the providers to better control the country’s currency.