Zim dollar among Africa’s worst currencies

June 23, 2022

NDAMU SANDU

 

The Zimbabwe dollar was among the worst performing currencies last year on weak export revenue, a new report has shown.

The African Trade Report 2022 done by the African Export-Import Bank (Afreximbank) noted that the local unit, alongside the Ethiopian birr, the Libyan dinar and the Sudanese pound were among the worst performing currencies in 2021.

“Shortages of essential goods and weak export revenue reduced the supply of US dollars and put pressure on the Zimbabwean dollar, which depreciated by about 68.42 percent against the US dollar in 2021, from a deprecation of 503.53 percent in 2020,” the report said.

The local currency has been under pressure from major currencies following its return in 2019 as the sole currency, four years after it was demonetised. It had been dumped following the use of the introduction of the multi-currency regime in 2009.

The local unit has been under pressure amid calls for redollarisation as business seeks a stable currency despite insistence by authorities the Zimbabwe dollar is here to stay.

Unions are pushing for the restoration their salaries to the pre-October 2018 levels arguing that the salaries have been outpaced by rising inflation which entered three-digit levels, hitting 131.7% in May.

The pressure by unions comes as the cost of living has risen to ZWL$131,000 as fear swells of “a winter of discontent” as workers push for a review in salaries to keep pace with rising prices. Health workers downed tools on Monday pushing for a review of salaries.

The Afreximbank’s report said the sustained depreciation of the Ethiopian birr against the US dollar arose largely from the impact of the pandemic and socio-political instability fuelled by the regional conflict in Tigray with consequent heightened inflation.

“After appreciating by 0.02 percent in 2020, the Libyan dinar depreciated by about 220.74 percent on account of persistent political instability and insecurity, which disrupted the production of oil, the country’s main source of foreign exchange reserves,” Afreximbank said.

It said the Sudanese pound continued to perform poorly, depreciating further by about 589.13 percent against the US dollar in 2021, from a depreciation of 17.98 percent in 2020.

“The shortage of foreign reserves and a high parallel market premium, along with rising uncertainty, prompted the government to devalue the currency to SDG375:US$1 in February 2021 from its value of SDG55:US$1 in February 2020,” Afreximbank said.

 

 

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