- Sustained Appreciation: Strengthened 3% achieving a cumulative gain of 9% over three days
- Market Disconnect: The parallel market rate remains stable between 45-50 ZWG per USD
- Need for Genuine Impact: Effectiveness will be measured by its tangible benefits without this, the gains may be viewed as superficial
Harare- The Zimbabwe Gold (ZWG) currency has exhibited an appreciation on the formal market, recording its third consecutive gain on November 6, 2024.
The currency surged 3% from 26.99 to 26.01, translating to a 9% cumulative gain over three days.
This upward trajectory marks the currency's best performance year-to-date and since its devaluation in late September.
The increased value suggests easing pressure on the interbank foreign exchange market, indicating improved foreign exchange liquidity and reduced demand.
However, the parallel market rate remains stubbornly range-bound between 45-50 ZWG per USD, casting doubts on the effectiveness of the currency's appreciation.
The disconnect between the formal and informal markets raises concerns about the sustainability of the ZWG's gains.
Unless the appreciation translates into tangible benefits for Zimbabweans, it risks being perceived as a theoretical construct rather than a practical reality.
From a macroeconomic perspective, the Reserve Bank of Zimbabwe's (RBZ) efforts to stabilize the currency may be viewed as a tactical maneuver to alleviate foreign exchange pressures.
Nevertheless, the persistence of the parallel market rate and the lack of corresponding adjustments suggest potential underlying structural issues.
If this firming remains a theoretical framework rather than a practical reality for Zimbabweans, it risks mirroring the previous era where the RBZ capped auction allotments at less than $20 million, when forex demand surged as high as $40 million per week.
Ultimately, the genuine impact of the ZWG's appreciation will only be realized when the parallel rate converges or narrows with the formal market rate, and exchange rates stabilize.
Until then, skepticism surrounding the RBZ's interventions may persist, fueling concerns that the currency's firming is merely a cosmetic adjustment rather than a meaningful correction.
However, it is premature to suggest acts of rate fixing unless we draw from our past experiences with the Reserve Bank of Zimbabwe (RBZ) and its history of manipulating rates. For now, ZIG needs time to determine if it will sustain its appreciation.
If it continues to rise, the market will likely respond favourably, if not, it would indicate that the bank hasn’t learn anything from previous missteps.
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