Zimbabwe dollar's devaluation accelerates

24 Mai 2020

Harare, Zimbabwe,  May 24 (Infosplusgabon) - The Zimbabwe dollar (ZWL) continues to depreciate on the parallel forex market, with prices standing at US$1:ZWL70.

Last week, from Monday to Saturday, the USD:ZWL rate plunged 23 percent as the ZWL due to the currency lacking foreign currency, commodity or market confidence backing.

The fast deterioration has left monetary authorities baffled as all efforts to curb the rising exchange rate have fallen flat with central bank governor, John Mangudya, likening parallel forex market dealers to the coronavirus before parliament last week.

“The ZWL$ experiment and 'policy misstep' was never going to succeed because the right institutions i.e. a strong & independent central bank; high productivity & production; trust and confidence among others were and are not yet in place. Economies are not commanded into prosperity,” said local economist Prosper Chitambara, on micro-blogging website Twitter.

And with the global coronavirus pandemic, two of Zimbabwe’s sources of foreign currency - exports and diaspora remittances - are set to be adversely affected.

American economist, Steve Hanke, rated the ZWL as the second junkiest currency in the world after Venezuela's.

The main effect of the falling ZWL has been hyperinflation as well as wage and business income erosion resulting in an expected double digit contraction for 2020.

MDC Alliance Vice President and Harare East legislator, Tendai Biti, who is a former finance minister, repeated previous calls for the adoption of the South African rand and joining the Rand Monetary Union (RMU).

The RMU  links South Africa, Namibia, Lesotho and Eswatini into a monetary union whereby the latter three countries use the former's currency to back their own.

“In July 2010 after a meeting in Boksburg, Johannesburg, with Pravin Gordhan (former South African Finance minister) I briefed my principals on the need and imperator of joining the Rand Monetary Union. The idea was ferociously shot down purely on the grounds of nationalism. South Africa was said to be brash and arrogant,” said Biti, in a series of tweets.

“Be that as it may adoption of the Rand and joining the Rand Monetary Union is the only viable mid-term solution. The US$ is overvalued and has appreciated more than 2% in last two years. Zimbabwe must devalue to a stable international currency which is the Rand.”

“Thirdly regional integration is the future. The region needs both free trade & a monetary union. But for Zimbabwe key issue is the discipline that will forced on some in its efforts to achieve fiscal convergence with rest of the region. Loss of monetary policy control is key step.”

As Finance minister, Biti oversaw Zimbabwe’s highest consecutive growth rates between 2009 and 2012 since independence based off statistics of the country’s gross domestic product at the World Bank.

“With the US$ now trading above ZWL65 on the parallel market it is time the regime accepted the failure beyond any shadow of doubt of its monetary and exchange rate policies. We have constantly argued that you can rig everything else but not the economy. An urgent reset is required,” Biti said.

FIN/ INFOSPLUSGABON/FRI/GABON2020

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