Govt has all but admitted that Zimbabweans have lost confidence in the local currency, saying it was aware people were trooping to the black market to buy foreign currency to avoid a repeat of 2008 where hyperinflation eroded their savings.
Finance deputy minister Clemence Chiduwa told Parliament on Thursday that government was witnessing a massive switch by Zimbabweans to the black market to buy United States dollars to hedge against losses.
“What really is driving the black market rate? These are behavioural legacy issues to say we encountered this in 2008 and we are using the US dollar as a store of value. The moment someone gets a Zimbabwe dollar, they immediately change it to US dollar,” Chiduwa said.
“People are saying the moment I get money I should convert it to US dollars, but because of benchmark pricing it has filtered to pricing models in the shops where you see that the pricing model is now following the parallel market rate,” Chiduwa added.
“As a result of that, it is now affecting the livelihoods of our people. We have said in order to cushion our people as we try to get long term solutions, we have come up with the payment that we are now giving to civil servants in US dollars.”
Said Chiduwa: “We are equally worried about the movement in the exchange rate. We have said before that the movement in the exchange rate, especially on the parallel market, is not linked to fundamentals.
“You look at government expenditure vis-à-vis the revenue that we are generating as Treasury. Since November 2018 we have not borrowed from the central bank. We live within our means. As a government, we are very clear in terms of where we are going.
“You cannot run a country without a monetary leg. The proper management of a country in terms of economic management requires both fiscal and monetary policy.”
President Emmerson Mnangagwa’s government re-introduced the Zimbabwe dollar in June 2019 after abolishing a multi-currency regime which had been in place since 2009.
Critics at the time accused the government of rushing the introduction of the local unit without necessary economic reforms and backing of foreign currency reserves.
Mnangagwa has been under pressure to dollarise, with teachers in particular, staying away from work citing incapacitation. Civil servants are receiving US$175 against their demands for US$540 which they used to earn in 2018.
There is also disgruntlement in the private sector where employees are agitating for US dollar salaries.
The Zimbabwe dollar is trading at US$1 to $260 at the black market and US$1 to $135 on the auction system.
Mnangagwa has said there is no going back to dedollarisation while Finance minister Mthuli Ncube recently announced a number of measures to stabilise the local currency. -Newsday