Zim Dollar In Deep Trouble
22 May 2020
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Newly appointed Bankers Association of Zimbabwe (BAZ) president Ralph Watungwa has said the spike in the parallel market rate will result in
the reduction of forex amount into the interbank foreign
currency exchange platform as more traders prefer to trade at platforms where there are high premiums.

The development comes at a time when the Zimbabwe dollar has collapsed to 1:60 on the parallel market against the United States Dollars as confidence in the local currency hits rock bottom.

The depreciation comes as the official bank rate remained fixed at 1:25.
“The spike of the rate on the parallel market will certainly affect the official market as fewer volumes will be transacted officially as more people
will flock to where there are high premiums,” Watungwa told Business Times.

“However, the black market is illegal, prohibited and associated with risk, therefore, that menace is rewarded with high premiums. Something is
lacking on the official platform and more needs to be corrected to attract companies to trade on the platform.”

On Monday morning, it took 52 Zimdollar to buy one US dollar hard currency note on Harare’s grey market exchanges and rates went further to 1:60 by Wednesday evening.

Two weeks ago after the closure of some agent lines, around 40 Zimdollars bought one US dollar note on the black market. However, the
system backed parallel market forex dealers adapted and devised new methods to increase the rate.

The Zimdollar is also plummeting on the interbank foreign currency market, which values the local currency more favourably.

Some illegal foreign currency dealers believe the Reserve Bank of Zimbabwe might be driving up the value of foreign currencies against the Zimdollar because the central bank needs foreign exchange to finance critical imports such as food and fuel.

The central bank has strongly denied it participates on the forex black market.

Economist John Robertson said the local currency collapse is being fuelled by supply imbalances resulting from the central bank requiring
importers to keep high levels of foreign exchange in their accounts.

An economist who declined to be named said Zimbabwe’s currency is losing value because the central bank is growing the supply of Zimdollars
in order to fund government programmes and to alleviate
a shortage of notes caused by rampant inflation.

“The major causes of Zimbabwe dollar exchange losses are growth in money supply by RBZ to fund quasi-fiscal programmes such as Command Agriculture and loss of confidence in the economy,” he said.

Times Live