The Zimbabwean dollar which has been on a free fall has for the first time in a long time gained some strength against the US Dollar at the central bank foreign currency auction.
It firmed up from $6927 to $6327, a 9% or Z$600 gain against the US Dollar.
Apparently, market watchers say the firm is nothing much to write home about and artificial.
They say the central bank has taken out the Zimbabwean dollar liquidity in the market place hence the shortlived firm against the US dollar.
Therefore the market is short of the Zimdollar to buy the auction US dollars.
So they say the movement of the rate is artificial and manipulated!
“Shortage of the local currency does not mean that importers and their business enterprises have stopped working.
“It just means that they are preferring to use their UD dollars to imports goods.
“The exchange rate is determined by the auction floor rate.
According to the central bank, auction forex only serves 13% of the total import bill of Zimbabwe.
87% is sourced elsewhere.
“Can the central bank sustain its liquidity crunch? No it can’t and it won’t!
“WHY? Because Government contractors haven’t been paid including parastatal contractors like ZUPCO who rely on government payments.
“If contractors are paid, they will flood the Black Market looking for US Dollars and the local currency will crash again.
“That is why I said in my opening remarks that the patient has not been cured, they simply starved the patient and are celebrating that artificial response.
“Civil servant salaries were last adjusted when the rate was at Z$1,500 against the US Dollar.
“But most crucially, big exporters are not getting their export surrender Zim Dollar payments too. The government has decided to roll over these payments creating a Zim Dollar backlog.
“A time will come when all these Zim Dollar payments will flood the market, that time the local currency will crash again.
“Do not be fooled by election tinkering of the exchange rate.
The market is fast dollarising , preferring to use US Dollars instead of Zim Dollars because Zimbabwe is officially under hyperinflation.
“Even the official blended inflation rate month on month inflation rate is at 74%. This in economics classifies Zimbabwe as hyperinflation.
This is the second time it has happened in five years.
“Things will only improve when there are serious structural changes in Zimbabwe’s economy and politics and not piecemeal tempering with the exchange rate.
“In Nigeria the central bank Governor was suspended for this, and the forex market was liberalized.
“In Zimbabwe the appointing authority has no appetite for doing the right thing,” notes renowned investigative journalist Hopewell Chin’ono.
Apparently, former Finance minister Tendai Biti says command economics doesn’t work & will not work adds that the attempt to control money supply by draining RTGS $ in circulation is a myopic measure that can only bring temporary relief.
He says permanent solution lies in stopping corruption & fiscal consolidation, in short eat what you kill.
“The Zim dollar is a on free fall. In 2023 it has lost an average of -1.83% per day with a zenith fall of -24.6% reached on 7 June 2023. The election season will exarcabate the free fall despite the current stand still. The crises is hitting hard wananchi whose disposable,” he says.
Zwnews
