Zimdollar to slide further in Q4

TINASHE MAKICHI


The Zimbabwe dollar is expected to further slip in the fourth quarter of 2020 as pressure mounts on authorities to fully re-dollarise the economy, a
report on the country’s economy has shown.


The Reserve Bank of Zimbabwe (RBZ) last week introduced a new foreign currency auction system to determine the Zimbabwe dollar exchange rate.

There have been indications that if this new system succeeds, it would help build market confidence, improve access to foreign currency and help stabilise the exchange rate.


According to a Zimbabwe Economic Review and Outlook by economist Christopher Mugaga for June 2020, the local currency is expected to suffer a similar fate to the forex auction system introduced by former governor Gideon Gono in his first term in office.


“Currency slip is expected in the fourth quarter of 2020 which will see the economy fully re-dollarising given an expected snail pace adjustment of the newly introduced foreign currency auction system.

It will suffer a similar fate to the 2000 forex auction system introduced by former Governor Gideon Gono,” read part of the report.


He projected GDP to decline by 12.5% in 2020, 4.8% in 2021 and a 1.2% in 2022.


Official year on year inflation is expected to close at 1250%, driven by issuance of TBs to incentivise businesses affected by Covid-19 while subsidies are expected to push up reserve money as Treasury and the
RBZ come under pressure to deal with a vulnerable populace.


According to the report, foreign direct investment is expected to decline to 2009 levels of US$102m from the current US$259m while diaspora remittances are expected to plunge to an average of US$215m from the current US$619m.


“The net effect will be worse due to pressure on resources as more Zimbabweans return home following lockdown across the world,” the
report further shows.


State Owned Enterprises restructuring according to the report is not a possibility this year and they will remain a drain on the fiscus and their inability to cope with technological advancement might even worsen their woes as the country smarts from the effects of Covid-19 and head for 2023 elections.


In addition, the influence of Non-Governmental Organisations (NGOs) will be felt in strengthening accountability and fighting corruption as political reforms shall not be part of the agenda for NGOs and CSOs.


“They will rather push Mnangagwa to tackle corruption before any
budgetary support can be extended.


Given the socio-political dynamics obtaining, it remains a pipedream
for him to tackle corruption.


Any chances for him to deal with corruption will only be possible after
re-election in 2023,” reads part of the report.


The report said the country’s tariffing models remain a threat to the viability of businesses regardless of the model which shall be used
and as long as there is a currency conundrum or exchange rate
mispricing, doing business will remain a hustle.


It has been noted that the populist stance being pursued by government
will not give Zimbabwe Energy Regulatory Authority or Postal and
Telecommunications Regulatory Authority latitude to push for
optimal tariffs and this will also have spillover effects on fuel given the
suboptimal prices.


Fuel queues are expected to remain a common sight for the whole year
with insincere ineffective upward adjustments being effected time and
again.


The report said the impact of Covid-19 will be and is quite appalling with labour supply so significantly reduced due to absenteeism from work, working from home, closure of businesses and parents staying at home to take care of dependants.

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