· Interbank ex rate loss marginalizes
· Confidence in currency market gradually improves
· Parallel ex rate stabilizes
Harare - The ZWL has continued to depreciate against the United States Dollar (US$) in each respective trading session this year. However, the magnitude of exchange loss has since marginalized.
This time last year, the ZWL was shedding off an average of -0.85% a day on the interbank market, which has since marginalized to -0.3% a day in recent sessions. The ZWL dipped by a whopping -14% in January, followed by a slow-down to -10% in February. Since the beginning of March, the ZWL has depreciated by -3% and is projected to maintain a constant level of depreciation throughout the remainder of the month.
In the week ended 17 March, 2023, the ZWL shed -0.4% against the greenback, which is a record low this year. In the prior week, the ZWL depreciated by -1% which was also a slow-down from the weekly average of -2% this year.
The continued use of the US$ in Zimbabwe has seen a growth in US$ balances, dominating more than 50% of the total money supply in real terms. This has aided in easing access to foreign currency due to increasing supply.
Last year the Central Bank introduced some strict measures which were meant to curtail inflation through the exchange market. These measures have notably stabilized the currency market as the curtailing of money supply constrained liquidity which was normally channeled through the informal currency market.
Recently at a breakfast meeting, the Governor of the Central Bank hailed the partial dollarizing of the economy, and admitted that a successful de-dollarization would take years and can-not happen over-night. This is opposed to his stance in the previous years when the government penalized the use of foreign currency in the economy, declaring the ZWL the only legal tender in the country.
The admittance and acceptance of partial dollarization by the government has helped increase confidence in the currency system in the country as citizens are no-longer forced to only legally trade or hold on to a highly fragile currency. Traders who were once penalized for the use of foreign currency are also now legally allowed to transact in foreign currency, which has aided in projections and planning.
The slow-down in the magnitude of exchange rate loss also emanates from the reduced pressure on the formal currency markets as compared to early-year levels at which the market was suspended for the holidays and only opened after almost 3-weeks. Access to foreign currency on formal channels has gradually improved since the beginning of the year, which has also eased pressure on the informal market. The parallel exchange rate has sailed steadily for a number of weeks, which is reflected on the formal currency market activities as well.
Confidence index in the economy, according to inhouse projections, has been on a gradual uptick in recent weeks, which has also seen increased participation on regulated financial markets.
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