- The currency depreciated to ZWL4.577
- This was from ZWL4.559 last week
- However, the future of ZWL remains clouded
Harare- As the elections period draws closer, the Zimbabwe dollar has encountered its third consecutive session of losses against the US dollar. On the latest wholesale RBZ-governed auction market, the currency depreciated to 4577.5024 against the greenback. This marks a slight decline from the previous week's exchange rate of 4559.7414.
Despite a decrease in the number of bids from 16 in the previous week to 13 this week, there has been an increase in the amount allotted to US$18.8 million from US$17.5 million. This indicates a resurging demand for the US dollar, despite the reduction in the number of bids.
During the midterm monetary policy, the government opted to maintain a hawkish stance, which involved tightening borrowing conditions. As part of this approach, interest rates were kept at 150%. Additionally, the government promised to keep the liquidity of the Zimbabwe dollar tightened.
With the continued implementation of sound fiscal policies, there is a potential for maintaining the positive trajectory. By ensuring responsible fiscal management and prudent economic strategies, it becomes possible to sustain the favourable direction of the economy.
One challenge is that the current appreciation of the Zimbabwe dollar may be artificially influenced. This is evident in the practice of not providing exporters with their 25% Zimbabwe dollar surrender components, which potentially generates sufficient funds for bidding on the auction markets. The analysis is based on the increasing export receipts observed in June and July, suggesting a positive trend.
This suggests that the government has not fully honoured the 25% surrender requirement and is temporarily withholding this obligation. Similarly, pending government projects are facing delays in payment to suppliers. These circumstances indicate potential challenges in the timely fulfilment of financial obligations by the government, which can have implications on exchange rate movements and currency stability.
Once these obligations begin to be settled, the value of the Zimbabwe dollar could experience a significant decline, potentially returning to a lower level.
Given these uncertainties, the future outlook for the Zimbabwe dollar remains uncertain, and its trajectory will depend on various economic factors and policy decisions.
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