THE revived Zimbabwe dollar yesterday firmed against the United States dollar following the abolishing of the multi-currency system and the re-introduction of the local currency as the sole legal tender in the country.
BY BRIDGET MANANAVIRE
The black market exchange rate yesterday tumbled to as low as ZW$$8 for US$1 from about ZW$12,50 for US$1 on Monday, when the new policy was introduced through Statutory Instrument (SI) 142 of 2019. Economists said the reaction was normal, but it would be too soon to make a conclusion on whether the rates will remain low as the market was still volatile.
“The policy was supposed to increase the flow of foreign currency into banks that would lead to its availability. I am not sure that if it has gone down as you are saying because when I checked yesterday the rate was at ZW$15 for US$1, but if it has, it means the policy is achieving its intended purpose. If banks are selling at a low rate which should be around $6,7 then importers would prefer going to the bank instead of the black market,” economist John Robertson said.
“I would say, however, that it is too soon to tell if the policy is working as next week things might change. The question now is what is the central bank going to do with the money raised by commercial banks. We have debts, including the Eskom one and soya beans and wheat. We have outstanding debts that have accumulated over time and what will stop the debt from accumulating further? Those are the fundamentals that need to be addressed.”
The Zimbabwean dollar, which was abandoned in 2009 after being ravaged by hyperinflation, this week, became the country’s sole currency through SI 142 of 2019, known as the Reserve Bank of Zimbabwe RBZ (Legal Tender) Regulations.
In 2016, government introduced the bond note to the basket of currencies, a fiat currency which was ostensibly meant to incentivise exporting firms.
Finance minister Mthuli Ncube this week said SI 142 of 2019 is meant to restore the central bank’s monetary function and contain spiralling commodity prices and inflation which currently stands at 97,85%.
Economic analyst Prosper Chitambara said the rate will be determined by the availability of the forex on the formal market.
“I think some black market traders have been forced underground and there is also apprehension and a wait and see attitude. Ultimately, the rate will depend on the availability of the foreign currency on the formal market,” he said.
“Let me add that it is normal for rates to tumble the way they did when such a major policy has shocked the market.”
Economist and University of Zimbabwe lecturer Ashok Chakravarti said the measures put in place by government were working and that there were more measures that government was going to implement.
“The rate has gone down is because of the measures that have been put in place by government which have put a monetary squeeze which has resulted in the availability of the RTGS. The Reserve Bank has also put in measures to support the flow of foreign currency on the foreign exchange market,” he said.