THE Zimbabwean dollar has lost at least 90% its value on the black market during the first quarter of the year, pushed down by the shortage of foreign currency, further widening the gap between the official and parallel market rates.
parallel market continues to gallop, central bank governor Gideon Gono has kept the lid on the official market, a move that has worsened the situation.
The parallel market has been around $99 201,58 to the United States dollar, giving the false impression that the local currency was now stable.
However, on the parallel market the local currency has continued to crash. The shortage of foreign currency has also pushed companies against the wall as they resort to the black market.
For the past three weeks the dollar has been trading at around $210 000-220 000 against the greenback, well above a rate of between $105 000 and $115 000 that prevailed during the first week of January.
On the inter-bank, the dollar has been trading at $99 201,58 to the greenback since January 24, when Gono introduced the volume-based exchange rate.
The local currency had opened the year at $82 300,35/US$1 on the official market.
Experts however warn that it could crash further to end the second quarter at between $460 000-$500 000/US$1 in the black market.
“The worst is yet to come. It’s on a rollercoaster and it could be worse than before,” said an analyst with a local bank.
The real crunch, he said, would come after the tobacco proceeds would have been used up.
The tobacco selling season is due to open in three weeks’ time but the government is yet to come up with a new price.
This week dealers were quoting the Zimbabwean dollar at anything above $355 000 for the British pound depending on volumes while the South African rand and Botswana pula were trading at $38 000 and $43 000 to the dollar respectively.
On the inter-bank the same currencies were trading at $172 400, $16 100, and $18 000 respectively.
According to the new volume-based exchange rate, volumes below US$5 million will not trigger any change on the inter-bank rate, while volumes within the US$5-$10 million would see the rate move by +/-1%.
The US$10-$15 million range will in turn see an automatic adjustment to the exchange rate either side of 1,5% and volumes exceeding US$15 million will be rewarded with a 2% adjustment.
Analysts however say the new exchange rate management system is failing because it still represents RBZ interference in the system.
The system is an attempt to create a false sense of stability of the fragile dollar.
Economic consultant John Robertson said the absence of significant foreign currency inflows would further weaken the dollar on the black market and trigger massive price increases, mostly on imported products.
He said that would push the prices of products with an imported component.
“The dollar would continue to crash further on the parallel market and force prices of imported goods and all local products that depend on energy and transport up,” Robertson said.
“The volume-based exchange rate would soon become unsustainable and result in the over-valuation of the Zimbabwe dollar.”
“The impact is disastrous on smaller companies with less cushion and no external operations,” said Robertson, adding:
“Unless something is done soon, most of these companies will close shop.”
He said the rate at which the dollar is losing value would continue pushing the inflation rate up.
“In a country where about half the population is reportedly threatened with starvation, the increase in inflation would be felt particularly hard as the dollar continues to slide,” Robertson said.
The weakening of the local currency on the official market has sparked fears that inflation will once again spiral out of control this year as was the case in 2004.
The country’s annual inflation for February was 782%, the highest in the world.
Analysts have hinted that the local currency would crash further during the course of the year, driven mainly by the looming food shortages.