• ZWL tumbled marginally from 642 to 655 against US$
  • Black market rate moved from a range of 720-800 to 850-900 against US$1
  • US$15.3 million was allotted

Harare- The Zimbabwe dollar (ZWL) dropped by 2%, the worst perfomance in over two months to ZWL655 against the United States dollar from 642 registered last week. 

Parallel market rates against the Zimbabwe dollar shoot to a region of ZWL850-900 against the greenback from a region of between ZWL720-800 last month, upsetting the prospects of Zimbabwe dollar's stability and convergence of black market and formal market exchange rates.

The highest rate received for the Zimbabwe dollar climbed to ZWL678 from ZWL673 signalling high demand for the golden currency while the lowest rate stood at ZWL645, up from ZWL635 last week.

US$15.3 million was allotted this week from US$11 million last week.  The demand for the greenback is expected to grow as the nation nears the festive season.

However, there are major concerns that the civil servants’ bonuses in Real Time Gross Settlement (RTGS) will upset the RTGS market, leading to excess liquidity and resuscitate inflationary pressures the government is battling to bury.

Despite Finance and Economic Development Minister, Professor Mthuli Ncube’s assurance that the tight fiscal and monetary stance will propel, there is a Major concern that the government, as its tradition, will temper with the RBZ to cushion its 2023 elections.  In 2018, reserve money increased by a whopping 41%, plunging the nation into a record inflationary environment the following years.

Cumulative expenditures for the first nine months of 2022 stood at ZWL1.19 trillion, against a target of ZWL1.02 trillion, representing an expenditure overrun of ZWL173.9 billion. 113. The over-expenditure was on account of higher expenditure on recurrent expenses at ZWL900.8 billion, exceeding the target of ZWL715.4 billion.

Major recurrent expenditures were on compensation of employees, use of goods and services and safety nets.

Currently, the quarterly reserve money is held at 5% and below while repo rates, which were hiked by 12000 basis points remain at 200%.

“In 2023, national annual average inflation is projected to continue slowing down to double digit levels, underpinned by the continued tight monetary and fiscal policy stance and stable foreign exchange market,” Ncube said in a statement accompanying the 2023 national budget statement.

He added that, “Central Bank is expected to deploy all tools at their disposal to ensure the attainment of these targets, are consistent with their mandates.”

High repo rates and RTGS scarcity however, has affected the consumer behaviour and made borrowing costly. Companies have challenged the government to cushion the consumers’ pockets, however, without upsetting the RTGS: US$ market.

Meanwhile, Broad money recorded an annual growth rate of 425.8% to ZWL$1.9 trillion in September 2022, reflecting the expansion of both local and foreign currency components.

“Expansion of the local currency component was attributed to credit creation by banks, while the growth of foreign currency component was due to valuation changes associated with the exchange rate depreciation, as well as a real increase in foreign currency deposits,” Ncube said.

The 2022 national budget statement further reveals that on a month-on-month basis, broad money grew by 19.2% (ZWL308.24 billion) in September 2022, lower than the 33.3% (ZWL401.6 million) growth in August 2022, reflecting an expansion in foreign currency deposits with the country’s total Public and Publicly Guaranteed (PPG) debt estimated at ZWL2.2 trillion for domestic debt and US$14 billion for external debt (including blocked funds of US$3.1 billion) as at end September 2022.