Zimbabwe’s foreign currency market has been struck by a fresh wave of turbulence with the Zimbabwe dollar this week depreciating further against major currencies particularly the United States dollar, due to renewed buying pressure.
The development has immediately re-ignited the debate on whether Zimbabwe should re-dollarise or not.
Several analysts are calling authorities to re-dollarise the economy but the government has been adamant there was no going back on Zimbabwe dollar.
Government abandoned the multi-currency regime last year and re-introduced the Zimbabwe dollar.
Despite the government’s expectations that the local currency would be stable, it has continued to lose significant value.
There has been severe pressure on the local currency which has been losing value since February when the interbank market opened trading at ZWL$2.5:US$1.
By close of business yesterday, the Zimbabwe dollar was pegged at ZWL$17 to the United States dollar on the interbank market due to renewed buying pressure.
On the parallel market, the Zimbabwe dollar was trading at ZWL$24 to the US$1, amid fears the depreciation of the local currency will impact on the growth of the economy.
But, government has been fighting hard to defend the value of the local currency, despite serious erosion of value.
Finance and Economic Development Minister, Mthuli Ncube, has admitted the crash of the Zimbabwe dollar was keeping him “awake at night”. Ncube stressed his desire to keep the currency stable.
“It’s making me awake at night,” Ncube said.
“[But as] government, we will ensure we stabilise the Zimbabwe dollar. We are quite pleased because for the pastour months there was some bit of stability.
As the government, we have been a source of stability. We want to keep it like that.”
Government has been trying hard to stabilise prices of goods and services but, this has not happened. Ncube targets to ensure that prices are de-linked to currency volatility, a move that has been causing annual inflation to continue rising.
It is estimated that annual inflation is hovering at around 500%. Month on month inflation rate is, however, slowing down.
The inflation rate for December 2019 stood at 16.55% from 17.46% in November.
Analysts, however, say the month on month inflation rate was being manipulated by the government to achieve certain agendas because on the ground prices of goods and services continue to go up.
“We also want to make sure key monetary targets are met. We want to make sure that the pricing process is stable.
We want to ensure that prices are de-linked from currency volatility and less of US dollar pricing. We also want to keep government expenditure under control,” Ncube said.
Zimbabwe is grappling with an acute shortage of foreign currency especially the dollar. Given the demand for the greenback, analysts said the local currency could fall further this year.
This means even investors who were planning to invest in Zimbabwe can decide not to do so, amid calls for the economy to dollarise.
“The economic situation is such that we are now virtually a dollarised economy and the façade of using a bond currency is just, a front. Mthuli Ncube has to face it, accept it and deal with the situation. Denialism will prolong getting positive change,” Norton legislator, Temba Mliswa tweeted this week.