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Govt says willing-buyer-willing-seller for forex but it’s more like

The Zimbabwean government has made it clear that the ZW$ is here to stay. Yes, they know that the local currency is in freefall but they reckon they can turn it around. In trying to do that it appears they are throwing everything at the wall to see what sticks.

While we all know that the ZS$ is fast losing value, not all agree on what it’s actually worth today.

The government has insisted that the RBZ’s auction rate is the accurate measure of the local currency’s value. It values US$1 at ZW$173 as I write this.

Most analysts have criticised the closed auction for not being representative of actual market sentiment. 

The black market rate says US$1 is equal to as much as ZW$410. The disparity with the auction rate says one of the rates is wildly off.

The government is looking to fix this exchange rate mess and their solution involves liberalising the formal exchange rate. So, I guess that’s their way of admitting that the auction is not open.

Willing buyer willing seller

One new interesting measure is the willing buyer willing seller directive. On the 4th of April 2022, the RBZ announced that:

Further liberalising the foreign exchange market by allowing banks to conduct foreign exchange transactions of up US$1 000 under an arrangement agreed upon between banks and the Bank and in terms of which individuals with free funds and entities/corporates holding foreign exchange in their foreign currency accounts (after meeting the statutory surrender requirements) shall be free to sell foreign currency to banks on a willing-buyer willing-seller-basis.


Apparently this arrangement has been a moderate success and the President announced that the limit is being revised up to US$5,000 a day and US$10,000 a week.

This sounds positive, a proper free market just like the black market is but through official channels. 

The President says this willing buyer willing seller exchange rate is the one which shall be used for price discovery in the economy.

Don’t sing praises just yet, a closer look reveals that not all is as it seems.

Willing buyer

As I write this, the interbank rate rate sits comfortably between the black market and auction rates at 1:280.

That’s a head scratcher. If the interbank market is open, why are people not flooding to the banks to purchase USD? Why would people pay ZW$410 for a dollar on the streets if they can buy one at ZW$280 from the banks? 

What you would expect to see is people bid on the interbank exchange, driving the price up until it matches the black market rate. 

Of course, that activity could in itself drive the black market rate down. Every person that gets their USD from a bank would represent one less buyer on the black market. Less demand = lower price.

So the fact that this is not what’s happening shows that the buyer is willing but unable to act on that willingness. One starts envying those that are able to buy USDs at 1:280. Who are those lucky bastards able to buy at that rate? 

You can only get the USD from banks for ‘bonafide’ payments as prescribed by the RBZ priority list. Ah, there’s the catch we were looking for.

The average person can’t just walk up to a bank and ask to buy USD. You may have tried and been told the bank didn’t have any USD to sell to you. 

So who is buying?

A bank told me:

Kindly note that anyone qualifies to buy but it depends on the availability of the funds.

I then asked if all that was stopping me from scooping up USD at 1:280 was availability of funds. Came the reply I expected,

Kindly note that it is based on willing buyer willing seller and it also depends what you would want to use the Usd for.

I noted it kindly. You have to tick some boxes to buy from banks. The RBZ clarified who can buy.

i. Buyers who need to make external/foreign payments. These are mostly just importing businesses.

ii. Individuals can access USD for education, medical expenses and importation of goods and services.

Banks will need to see invoices and statements confirming the amount payable. And they will make the payment directly to the supplier.

This takes me back to my teenage years when my mother demanded to see invoices before she would release a single dollar.

The government is working under the idea that we are or should be paying for everything else using ZW$. They ignore that the 2 greatest drivers of USD demand for the average person are rent and value preservation.

The government maintains that landlords should charge in ZW$ but they don’t. Landlords, like everyone else, are looking to preserve the value of their meagre savings.

The government doesn’t regard our need to preserve value because they believe they can make the ZW$ great again, restoring its value preservation properties.

The above restrictions then mean most Zimbabweans will never get their required USD from the banks.

So, the demand that banks see is just a fraction of the actual demand in the market. Meaning the parallel market will remain vibrant and the interbank rate will never reflect the true market value of the ZW$.

Willing seller?

Who would sell their hard earned USD at 1:280 to banks when they can get ZW$420 for a dollar on the black market? Someone who has no choice, that’s who.

The RBZ spelled it out clearly.

…foreign currency holders with funds in their FCA accounts shall only be allowed to sell their foreign currency to the bank managing their account. For corporates, the amount to be sold…is net of statutory deductions such as surrender requirement on export receipts and domestic sales.


As if you needed any more reasons not to bank your USD. If ever your USDs make their way into a bank account you will only be able to exchange them for ZW$ using a low rate.

If you decide to spend the USD electronically you still lose out. The government raised tax on domestic forex transactions to 4%, compared to 2% on local currency payments.

So you can’t change currencies or spend the forex electronically. Thinking you’re clever you decide to beat the system and just withdraw the money then spend it as cash. 

The govt saw you coming a mile away. They raised withdrawal charges from 5 cents to 2% per transaction. But wait, that’s equal to the local currency transaction tax. So yeah, someone didn’t think this through. 

All these measures are meant to discourage forex withdrawals and promote use of the ZW$. As it stands they only work to make sure we never deposit our forex. Also to immediately withdraw any funds in our accounts as that only costs 2% as opposed to transacting electronically which costs 4%.

The actual sellers

Individuals can avoid the system but businesses can’t do that. At least not completely. 

Any exporting company has to liquidate some of its forex receipts at the interbank rate. Same goes for domestic forex sales. Large companies have to deposit…

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