· * Zimbabwe dollar shed 0.3% against the US dollar
· * PMR has surpassed ZWL1250 mark against the US dollar to ZWL1300
· * Due to policy slippages during elections, the depreciation trend for the local currency is expected to continue
Harare- Embattled local currency, Zimbabwe dollar (Zim dollar) has recorded its most insignificant drop since the beginning of the year on the RBZ-governed Auction Market.
On the latest Auction Market held on the 21st of March 2023, the Zimbabwe dollar eased 0.3% against the tumbling greenback from ZWL912.5828 in the prior week to ZWL915.1822.
The Zimbabwe dollar has been depreciating by between 1% to 5% since the beginning of the year against the US dollar.
However, the least depreciation rate comes amid a blooming parallel market rate (PRR), raising speculations of a pegged and overvalued Auction Rate.
Soon after the announcement that the government has increased the security personnel’s salaries by 400% last week according to the local publication, Newsday (http://bitly.ws/BVBK) the parallel market rate shoot from ZWL1200 against a single greenback to ZWL1250 and during the week under review, the rate further shoot to a region of ZWL1300 to ZWL1320 against the greenback.
This has widened the premium between the official rate and the black-market rate by 11%, from 31% last week, to 42% this week.
The widening gap between the two foreign currency markets is indicative of one key thing: election fever is already at play. The government has started tempering with the RBZ operations, injecting more Zimbabwe dollars into the market against a few US dollars, thus, upsetting the law of demand and supply. Despite the government saying the RBZ is maintaining a tight monetary policy, high black-market rates signal high liquidity of Zimbabwe dollars in the market.
The continued disparity between the auction market rate and parallel market rate shows that the auction market cannot sustain the foreign currency deficit on its own, which is a great disincentive to exporters.
Year-to-date losses have surpassed 26% to 27% while year-on-year losses have widened to over 85%.
Due to policy slippages and fiscal indiscipline recorded in Zimbabwe during election times, the Zimbabwe dollar is expected to continue tumbling and the black-market rate to continue blooming.
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