Accessibility links

Zimbabwe Banks Could be Prosecuted for Breaking Currency Exchange Laws - 2004-04-08

Commercial bankers in Zimbabwe breathed a little easier when they found out that the Central Bank has granted them an amnesty for breaking currency exchange rules, something the bankers have been doing for years. But the banks are not immune from prosecution.

It was not until the Zimbabwe police announced they were going to prosecute three banks, including the largest one, with currency law violation that executives of those banks found out that there is an amnesty in place for bank managers.

The banks are being accused of violating the currency exchange laws by giving their foreign currency account holders much higher exchange rates than the official rate. The banks have been doing this since 2000 when the central bank fixed the official rate at 55 Zimbabwe dollars to one U.S. dollar.

The exchange rate on the streets at that time was about 20 times more than that, and grew to more than 5,000 Zimbabwe dollars for one U.S. dollar, and that is roughly the rate the banks gave their clients holding foreign currency accounts.

Among those who availed themselves of this unofficial practice are the state electricity supply company, the fuel procurement organization, and the state-run grain marketing board.

Last December the newly appointed central banker, Gideon Gono, himself a former commercial banker, cracked down on currency speculators and tightened Zimbabwe's monetary policy. A dozen top bankers fled Zimbabwe for fear of prosecution.

The news of the amnesty, which has apparently been in place for about three months, was published in a weekly newspaper Thursday and confirmed by several commercial bankers. It applies retroactively to bank managers, but not to the banks themselves.

Some commercial bankers welcomed the announcement, saying this might bring stability into the financial sector. Others have said they will withhold their judgment until they see whether the police will go ahead with the prosecution of commercial banks.

Meanwhile, the central bank has told commercial banks that, amnesty or not, they are not immune from prosecution for violating the currency exchange laws.