Following the dramatic devaluation of the Zimbabwe Gold (ZiG) currency last Friday, the informal sector is still grappling with the sudden shift in exchange rates. While the formal sector has largely coalesced around the new official rate, our latest market survey reveals a more chaotic picture in the informal economy, with multiple rates in use and widespread uncertainty.

The Formal Sector Adjusts

As we previously reported, the Reserve Bank of Zimbabwe (RBZ) allowed the ZiG to depreciate from about 14 ZWG per USD to approximately 25 ZWG per USD. The formal sector, including supermarkets and other registered businesses, swiftly adopted this new rate, leading to immediate price adjustments and scenes of abandoned shopping carts as consumers found their purchasing power suddenly diminished.

Informal Sector in Flux

Our snap surveys over the weekend and into Monday paint a picture of an informal sector still trying to find its footing:

Dominant Rate: Most kombis (minibus taxis) and vendors are using a rate of 30 ZWG per USD for cash transactions. For example, an item priced at US$1 would cost 30 ZiG, and a US$1 note would yield 0.50 ZWG in change.
Emerging Higher Rate: About 35% of traders have adopted a higher rate of 40 ZWG per USD, mirroring the rate used by some formal businesses like pharmacies for RTGS and card payments.
Extreme Outliers: Some vendors are demanding rates as high as 50 ZWG per USD, though these appear to be in the minority.

Understanding the Multiple Rates

In off-the-record interviews, traders provided two main reasons for using higher rates:

Recouping Losses: Some vendors held significant ZiG reserves, believing in its gold backing. The sudden devaluation left them facing substantial losses, and higher rates are an attempt to recover.
Hedging Against Future Shocks: With uncertainty still high, some traders are using inflated rates as a buffer against potential further devaluations.

A Tale of Two Rates

The current situation underscores the ongoing dichotomy in Zimbabwe’s currency market:

Official Rate (Willing Buyer Willing Seller): Currently just under 25 ZWG per USD, this rate is primarily accessible to formal businesses and government agencies.
Informal Market Rate: Informed by parallel market dynamics, this rate is typically higher and more volatile, reflecting the risks and lack of regulation in informal currency exchanges.

Caution Advised

Given the current volatility and multiple rates in circulation, we strongly urge our readers to exercise extreme caution when engaging in currency exchanges or making significant purchases. The risk of substantial losses is high until the market stabilizes.

Looking Ahead

As the situation continues to evolve, several key questions remain:

How long will it take for the informal sector to settle on a consistent rate?
Will the gap between official and informal rates narrow or widen in the coming weeks?
How will these ongoing currency issues affect inflation and overall economic stability?

At Zimpricecheck, we’re committed to providing timely and accurate information to help our readers navigate these challenging economic times. We’ll continue to monitor developments closely and provide updates on how these changes are affecting prices across various sectors of the economy.

For those looking to stay informed, we recommend:

Regularly checking our latest grocery prices to make informed shopping decisions.
Keeping an eye on our exchange rates page for the most up-to-date information on currency values.
Subscribing to our WhatsApp channel for real-time updates on economic developments and price changes.

As Zimbabwe navigates this latest economic challenge, staying informed will be crucial for businesses and consumers alike. We’re here to help you make sense of the changes and make informed decisions in these uncertain times.