The value of the Zimbabwean dollar continues to plummet against the USD with the black market rate approaching $13 ZWL for each USD while the official interbank rate has exceeded $11 on some exchanges. This means for the first time the black market rate has exceeded pre-USD ban levels.
The rate is shaking of the Mthuli Ncube’s measures
I distinctly remember what happened on 24 June. Like today, the value of the RTGS $ (as the Zimbabwean dollar was then still called) was falling fast against the USD. Most traders were paying just below $13 ZWL and around $9 in bond notes.
Out of the blue Statutory 142 of 2019 appeared on social media and things immediately cooled off as most traders took a wait and see approach. With more sellers than buyers as well as due to some of the proposed measures that banned the use of foreign currency locally the local currency gained.
The rate plummeted to as low as $4.2 bond notes per each USD in the course of less than 48 hours. The concerted efforts from the RBZ and the Finance Minister seemed to be worked as in the interim the official rate began to rise to meet the black market rate.
However, the power of the measures seem to have waned and I suspect I know why.
The rate is rising again
This can be blamed mostly on the fact that Zimbabwe continues to rely heavily on imports for a lot of things including the scarce electricity we have as well as fuel which is needed not only for transport but for generators.
The RBZ, as well as the industry, is on the hunt for the elusive US dollar and its companions including the Rand. There are significantly more buyers on the market now as jobless Zimbabweans try their luck on the money market.
Then there is the fact that there is an anticipated civil servant pay rise on the cards. The government is partly to blame for this. They have not even attempted to tame their wild spending habits resulting in the increased money supply.
Then there is the fact that the country is in a sustained period of political instability with reports of abductions and brutal crackdowns. These have cast a big shadow of permanent uncertainty on the country’s economic prospects. Reassurances from the principles that things will get better due to their austerity measures now ring hollow as the economy bites.
Also, the effects of the 2018/19 season drought are now beginning to take hold. These have made the country even more reliant on imports which means even more pressure on the scarce foreign currency the country can attract.