These days the ZWL: USD rate is on everyone’s lips. In recent weeks we have seen the rate rise from the usual stable 150 ZWL might to as high as 200 ZWL:1 USD. In a country that relies heavily on imports that has naturally led to a rise in prices as well. Matters have been made worse by a hike in fuel costs and an anticipated rise in ZESA tariffs. Former Finance Minister Tendai Biti has stirred controversy by suggesting that the rate might go as high as 400 ZWL: 1 USD before the year is over.
He opined that the government had been too quick to introduce the Zimbabwean dollar when all the fundamentals were not yet in place. He suggested that the Zimbabwean dollar had been rushed through because it suited some high placed elements in the government that thrived on economic chaos. All the government needs to do, he went on, to fight the current issue of the spiralling rate was to give in and redollarise the economy.
The only thing they need to fight is to dollarise, bring back the Zim dollar surrendering requirements, but they cannot do that because they are making money from the US dollar.
So politics of the stomach, politics of arbitrage will guarantee that we will continue having this distorted rigged auction rate because that is Zanu PF. They do not disturb their eating line.
The thing is right now, if we hit 400 by December then it is a no-go area. If you hit 400 it means that your month-on-month inflation will exceed 80% and that is hyperinflation.
So we are heading there slowly and surely. I would urge anyone sitting on RTGS to dispose of them as a matter of urgency.Tendai Biti Former Finance Minister
Eddie Cross, a former member of the RBZ’s Monetary Policy Committee had his own take as to why the rate was rising. He said there were foreign currency shortages on the formal market which was taking too long to settle. This forced businesses to look for foreign currency on the black market thus driving up the black market rate. This is nothing new, it’s basically common knowledge that this is the real reason why the rate is rising. What is not agreed on is the solution to this. The government would rather keep the rate artificially low and force exporters and other foreign currency holders to give up their foreign currency at this rate. Free market proponents believe the rate should be freely determined by market forces with the government relegated to the role of supervisors.