Zimbabwe abandoned its local currency in 2009, replacing it mainly with the US dollar after an episode of hyperinflation rendered the local currency worthless. The Zimbabwean dollar was reintroduced in 2019 in a bid to revive the stagnating economy, but the government decided in June 2022 to make the greenback legal tender again to try and tame rampant price increases.
According to FBC, in the first quarter of 2023, the Zimbabwean dollar depreciated 58% against the US dollar on the official market. At the beginning of the second quarter (1st of April 2023), the local currency was trading at ZWL$928.5887, we are now in the third week of April and the local currency officially trades at ZWL$1000 against the greenback currency. This indicates that the local currency has depreciated by 4, 27% from the rate of ZWL959.3111 against the greenback last week. Considering that traders are allowed to peg their prices at plus or minus 10% below or above the official rate, what it means is that in local currency US$1 can now be pegged at a high of ZWL1,100. According to market watchers, this week’s depreciation levels are an indication that the auction platform is resonating with realities on the ground as opposed to holding onto unrealistic premiums and that there is a possibility of closing the wide gap which was opened up by the parallel market premiums in the recent past.
In comparison, the widely accessible rate on the parallel market is currently around US$1: ZWL1 600 while some retailers and traders are demanding higher premiums depending on market factors.
The Foreign Exchange Auction Results as of 19th of April 2023 were as follows :
The SME platform allotted 290 bids at a value of US$1.8 billion with US$ 1.7 million being allotted whilst the MAIN platform allotted 292 bids at a value of US$19 billion with US$ 17.1 million being allotted, with allotments skewed toward productivity-related needs. On the SME platform, the highest bidding rate reached ZWL 1 125 against the lowest bidding rate of ZWL 978 whilst on the MAIN platform the highest bidding rate reached ZWL 1 100 against the lowest bidding rate of ZWL 978. This then gave a weighted average of ZWL 1 000.0227 making it the official RBZ auction rate.
Precise Management & Research Consultancy provides critical insights and recommendations that help organizations add value by assisting their clients in improving product quality, growing and expanding their businesses, lowering costs, retaining valuable talent. Get in touch with us at info@precisemrc.co.zw for all strategic information services.