Zimbabwe’s embattled currency has taken a hit, plunging by over 40% on the black market as the demand for foreign exchange continues to outpace the available supply.
A complex array of factors, including the conclusion of tobacco sales and a softening trend in global commodity prices, has significantly impacted the inflow of local dollars into the Southern African nation.
Persistence Gwanyanya, a member of the central bank’s monetary policy committee, highlighted that Zimbabwe, rich in minerals, relies heavily on mining for 85% of its foreign exchange.
Speaking in an interview on Monday, Gwanyanya acknowledged the ongoing challenges, stating, “Even this quarter, our situation will not have got to normal. We will need to manage the demand side, that is deal with the demand for forex and judiciously allocate resources.”
Zimbabwe has grappled with the stabilization of its currency since its reintroduction in 2019, leading citizens to favor the US dollar for various transactions, from purchasing goods to acquiring medicines.
Treasury interventions in June aimed at enforcing local currency tax payments provided a temporary respite by stabilizing the volatile exchange rate.
As of Monday, the local unit was trading at Z$10,900 per US dollar on the black market, as reported by ZimPriceCheck.com, a platform monitoring official and unofficial exchange rates.
This stands significantly lower than the official exchange rate of Z$6,467 per US dollar.
The central bank’s weekly auction, the official source of US dollars for companies, closed in December for the holiday season.
The recent depreciation has disrupted the equilibrium, with the gap between official and unofficial markets surpassing the 10% to 20% range set by authorities.
Gwanyanya stressed the need to re-establish this equilibrium, emphasizing the complex task ahead for Zimbabwe’s economic management.