ZWL records remarkable 9pc increase

Leafias Mazviro

The Zimbabwean Dollar (ZWL) has gained a significant increase of 9 percent on the Reserve Bank of Zimbabwe (RBZ)-governed Foreign Exchange Auction Market, marking its first notable gain since the reestablishment of the auction system in 2020.

The gain represents a positive shift in macroeconomic conditions and offers prospects for currency stability.

The latest appreciation followed the one witnessed last week on interbank, a 1 percent increase against the US dollar.

The Zimbabwe dollar traded at ZWL6326.5877 from ZWL6926.5764 last week, harvesting a 9 percent increase, the best performance since the beginning of the year and the reintroduction of the auction system in 2020.

One of the reasons which led to this better performance is the Government’s tax policy announcement on June 23rd which compelled companies to pay 50 percent of their June taxes in Zimbabwe dollars.

The policy implied companies selling US Dollars to get Zimbabwe dollars, thus increasing demand. This has boosted confidence in the Zimbabwean economy, as it suggests that the government is taking steps to increase revenue and stabilise the currency.

Some economists pointed out that, the appreciation may also be a gradual process related to the recent introduction of a new foreign exchange auction system by the Reserve Bank of Zimbabwe.

The system which was introduced is intended to improve the allocation of foreign currency and reduce the black-market premium on foreign exchange, which plays a significant in bringing the Zimbabwe dollar stability.

The parallel market rate has run down from 13000 per greenback to a region of 9 000 to 10 000 per dollar. However, the market still boasts circa 30 percent premium.

However, some analysts say that the appreciation of the Zimbabwe dollar is simply a short-term fluctuation in response to market forces, and may not be indicative of a broader trend towards currency stability.

A broader trend of currency stability entails continued money tightening especially ahead of the general elections, dealing decisively with corruption and improving the country’s business risk index. With more sanity increased in the economy, then, we can talk of a broader trend of stability

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