At the beginning of this month, the Zimbabwean dollar was trading at around $12.50 ZWL per USD. Now over the past few weeks, its value has plummeted to $20.50 and it’s still falling in value as we speak.
Calculations show that the Zimbabwean dollar has lost at the very least 64% of its value since the month began. That is a massive loss is a death knell sounding the death of local businesses and yet authorities seem unmoved by the impending catastrophe.
Bloomberg has come out and called the Zimbabwean dollar the worst-performing currency in the world. When their article came out they cited the fact that when it was introduced, the Zimbabwean dollar was trading at a sensible $2.50 ZWL: 1 USD. Over the following 6 months that went up to $13.50 a fall of above 80%.
So when the article came out the rate hadn’t even reached the low depths we are seeing right now. While some think this is a bubble, we don’t think so. If the rate later falls, if it ever does, it will never go back to those low levels we saw in June when the multi-currency regime was scrapped.
The reason is simple really, while the local industry is dying, demand for imports is only going to go up. Local industries have taken a rout with power cuts, fuel shortages and the drought taking their toll. Most lack essential raw materials even locally available raw materials are not being accessed in a timely manner.
The financial sector is besieged by tight and burdensome regulations crafted to favour the State and the elite. Exporting businesses are being relieved of the foreign currency at sub-par rates hurting their expansion drives and removing the incentive for them to want to export.
There are foreign currency shortages as we all know. There is the 2% tax that is making conducting business expensive. Struggling customers can no longer afford to buy most services at profitable prices. Corruption is rife and there is a general mood of foreboding doom
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