By Claire Obae
- The Zimbabwean government is putting a halt to mobile money and bank lending to prevent the U.S. dollar from taking over as the de facto currency once again
- Currently 400 Zimbabwean dollars is only worth $1
Zimbabwe is blaming the rise in the inflation rate across the country on mobile money, and wants to prevent the U.S. dollar taking over as the de facto currency once again. The country has declared a ban on lending by banks, shutdowns of fintechs and strict requirements on the use of mobile money in a bid to give the local currency a standing chance. In March, the local currency was trading at 210 Zimbabwean dollars for $1 and now at 400 Zimbabwean dollars for $1.
Why This Matters: Mobile money has been hailed as one of the most successful innovations in Africa. It is also one of the most innovative ways to bring financial inclusion to the unbanked and under-banked, something that Zimbabwe definitely needs.Given that Zimbabwe’s economy is still recovering from years of hyperinflation and currency collapse that saw its own currency virtually wiped out, the introduction of foreign currency has been instrumental in the growth of several sectors in the economy.
Here are the facts; the Zimbabwean dollar is worthless and has been for years. Herein lies the problem for the country, its government has printed too much money, causing inflation and devaluation of the currency to such an extent that people can’t buy food or other essentials with it anymore. The economy is gearing up for even tougher times ahead with no foreign currency reserves.
Regulating mobile money is less likely to boost the local currency. The Zimbabwean dollar has been on a downward spiral in a short span of time. The regulations will not stop the transactions, as the dollar’s dominance is so entrenched that a lot of its citizens are willing to pay a hefty price to secure U.S. dollars to survive.
What’s Next: With the various bans and restrictions, Zimbabwe is on the verge of a collapse as investors set shop elsewhere. The country is likely to face even higher levels of poverty and unemployment.
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