Over the past 3 months, we have noted a sharp decline in the movement of the RBZ auction rate. This has had an impact on economic activity, market interest rates, gross domestic product, and the unemployment rate in the country.
On the 1st of December, the RBZ auction rate was ZWL$ 654.8651 per US$ 1 whilst the parallel market was at ZWL$ 880 per US$ 1. Trading was only seen up to the 13th of December before it was suspended ahead of the festive season and the RBZ auction rate closed. From the 14th of December, the Zim dollar then eased by an average of 1.2% each per week. On 30th December the RBZ auction rate was still at ZWL$ 671.4466 per US$ 1 whilst the parallel market rate rose to ZWL$ 960 per US$ 1. There was a nearly 10% increase (880-960) in ZWL parallel market rates due to an increase in demand for the ZWL and increased foreign currency inflows as the festive season begins.
At the beginning of 2023, the RBZ auction rate then remained at ZWL$671.4466 per US$ 1 whilst the parallel market rate rose to ZWL$ 1000 per US$ 1. Zimbabwe’s interest rates still remained at 200% since December 2022. The exchange rate performance was largely driven by an overlapping expenditure outside of the government’s revenues. The exchange rate performance has had an impact on inflation outside of external factors hence it is likely that the country will grapple with further inflationary pressure given election year spending. On the 31st of January, the RBZ auction rate slid in value to ZWL$ 790,9998 per US$ 1 whilst the parallel market rate also increased to ZWL$ 1200 per US$ 1. There was a nearly 17% increase in the RBZ auction rate and a 20% increase in the parallel market rate by the end of January 2023.
The first week of February saw a further loss of value of the ZWL on the RBZ auction market as it slid to ZWL$ 801.6023 per US$ 1 whilst the parallel market rate remained at ZWL$ 1200 per US$ 1. The end of February saw the RBZ auction rate rise to ZWL$ 881.7513 per US$1 whilst the parallel market rate also rose to ZWL$ 1250 per US$ 1. Excess demand for foreign currency can also have an effect on a rise in exchange rates.
On the 2nd of March, the RBZ auction rate increased slightly to ZWL$ 892,6349 per US$ 1 whilst the parallel market remained at ZWL$ 1250 per US$ 1. In the second week of March, the RBZ auction rate slightly increased to ZWL$ 907,9236 per US$ 1 whilst the parallel market rate remained at ZWL$ 1250 per US$ 1. There was a slight increase of 1.6% in the RBZ auction rate whilst the parallel market is still the same.
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