- Since 2023 commenced, YTD losses have widened by 25%
- MTD losses have widened by 10%
- Since 2020, the Zimbabwe dollar has depreciated by 94%
Harare- Embattled local currency, the Zimbabwe dollar has widened Year-To-Date (YTD) losses by 25% on the latest Auction Market held on the 28th of February 2023, losing a quarter of its value within a period of two months. This is the worst performance for the Zimbabwe dollar, year-on-year since its re-introduction in 2019 and since the commencement of the RBZ-governed Auction Market in June 2020.
The Zimbabwe dollar traded at ZWL892.6349 with the highest bids on both auctions (SME Auction and Main Auction) soaring to ZWL990 against a single greenback while the lowest bids hit ZWL885 against the US dollar.
The Zimbabwe dollar continues plunging at an increasing rate, which is an alarming rate that is awakening the reminiscence of 2008’s hyperinflationary environment.
Since the commencement of the Auction Market in June 2020, the Zimbabwe dollar has depreciated by 94% while since its reintroduction, it has surpassed 99.9%.
On the parallel market, the Zimbabwe dollar continues to trade in a region of 1200-1300 against the single greenback.
The disparity between the parallel market rate (PMR) and the formal rate continues to grow to signal a total possible demise of the embattled currency ahead of 2023’s harmonised general elections.
The movement is largely indicative of three key things: (i) instead of stabilising the parallel market rate, a look at the ZWL performance on the Auction Market shows it is pacing up to the parallel market rate, (ii) a market in disequilibrium where there is a mismatch between ZWL demand and USD supply fuelling black market activities and (iii) it is an indication that the formal market has no capacity to satisfy demand by itself despite record foreign currency earnings by the country.
This means with a 25% foreign currency retention threshold currently employed by the RBZ, companies have to rely more on the black market to get foreign currency which is key for importing raw materials. A 25% surrender threshold is a disincentive for exporters due to a rapid depreciation of the local unit which is widening the disparity between formal and black-market rates.
Re-adoption of dollarisation may ease this pressure, bring stability and incentivise exporters.
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