Zimbabwean dollar loses ground again

Abel Karowangoro

The Zimbabwean dollar continues losing ground to the United States dollar in a development that could lead to a spike in the cost of basic commodities.

The local currency has encountered its third session of loses on the Reserve Bank of Zimbabwe (RBZ) governed auction market.

According to the results of August 16, RBZ wholesale auction market, the currency devalued to ZWL$ 4577.5024 from the previous week’s exchange rate of ZWL$ 4559.7414 per each greenback.

The number of bids went down from 16 to 13 this week. However, the amount of money allocated increased from US$17. 5 million to US$18. 8 million. The Government opted for a stringent approach during the midterm monetary policy by implementing measures to restrict people’s access to borrowing funds.

As part of this strategy, the interest rates were maintained at 150percent.

In addition, the Government promised to make sure there is not too much local currency circulating in the country. A local economy observer, Equity Axis, commented about this saying one challenge is that the current appreciation of the Zimbabwe dollar may be artificially influenced.

“This is evident in the practice of not providing exporters with their 25percent Zimbabwe dollar surrender components, which potentially generates sufficient funds for bidding on the auction markets. The analysis is based on the increasing export receipts observed in June and July, suggesting a positive trend,” Equity Axis said.

“This suggests that the Government has not fully honoured the 25percent surrender requirement and is temporarily withholding this obligation. Similarly, pending government projects are facing delays in payment to suppliers.

“These circumstances indicate potential challenges in the timely fulfilment of financial obligations by the government, which can have implications on exchange rate movements and currency stability.

“Once these obligations begin to be settled, the value of the Zimbabwe dollar could experience a significant decline, potentially returning to a lower level.

“Given these uncertainties, the future outlook for the Zimbabwe dollar remains uncertain, and its trajectory will depend on various economic factors and policy decisions.”

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