Zimbabwe’s economic development is hampered by price and exchange rate instability, misallocating productive resources, high informality, low investment, and limited structural transformation. Economic growth has been volatile over the past decade. High inflation, multiple exchange rates, and unsustainable debt levels have increased the cost of production, reduced incentives for productivity-enhancing investment, and encouraged informality. Trade integration has declined, and foreign direct investment (FDI) remains low, limiting the transfer of new technologies and investment in modernizing the economy.

In a significant blow to Zimbabwe’s economy, the country`s dollar experienced a sharp decline of 26% during Tuesday`s foreign exchange auction. The official exchange rate now stands at ZWL 1,888.0119 against the US Dollar compared to ZWL 1,404.8039 just a week ago. This extreme decline was due to the overvaluation and advocation of the local currency for the government to relax foreign currency controls. 

The Competition and Tariff Commission and National Competitiveness Commission have emphasized the need for market forces to determine the exchange rate and prices, suggesting that this approach is unlikely to lead to price increases since manufacturers` costs are already linked to the parallel market.

Below is how the USD is being traded in the parallel market as of 23rd May 2023: