- Zimbabwe Ends Decade of Dollarisation in New Currency Reform
Zimbabwe made its interim currency the country’s sole legal tender on Monday, ending a decade of dollarisation and taking a another step towards relaunching the Zimbabwean dollar.
The central bank also hiked its overnight lending rate to 50% from 15% as a part of a set of measures to protect the RTGS dollar introduced in February.
“The march towards full currency reform is part of our transitional stabilisation programme,” Finance Minister Mthuli Ncube said in a video posted on Twitter.
“This move is really beginning to restore full monetary policy.”
Zimbabwean President Emmerson Mnangagwa, who replaced longtime leader Robert Mugabe after an army coup in November 2017, is trying to repair an economy ruined by hyperinflation and a long succession of failed economic interventions.
But a hoped-for economic turnaround is yet to materialise, and many Zimbabweans are distrustful of Mnangagwa’s promises.
Mnangagwa’s government last month agreed a staff-monitored programme with the International Monetary Fund (IMF) whereby the fund will help Zimbabwe implement coherent economic policies.
Analysts are sceptical that the latest currency reforms will be a quick fix for the deep problems that have constrained economic growth in the southern African country.
“Zimbabwe will have to show results before people are convinced,” said Jee-A Van Der Linde, an economist at South Africa-based NKC African Economics.
Van Der Linde said banning the use of currencies such as the U.S. dollar and South African rand could create panic since Zimbabwe did not have large foreign-currency reserves to back the RTGS dollar.
There was nothing standing in the way of the Zimbabwean central bank printing money as it had done in the past, he added.
The central bank said in a statement on Monday that it had put in place letters of credit worth $330 million to secure imports for important goods such as fuel.
It would also try to boost liquidity on the interbank forex market by removing a cap on margins for banks and making sure that more than 50% of the foreign currency that Zimbabwean companies have to surrender ends up on the interbank market.
Zimbabwe abandoned its own dollar in 2009 after years of hyperinflation had destroyed trust in the local unit.
Mnangagwa said this month that Zimbabwe must reintroduce its own currency by the end of the year.
The IMF has said Zimbabwe should quickly allow the RTGS dollar to float freely, allow exporters to sell dollars at the interbank rate rather than surrender them to the central bank, and raise interest rates to curb inflation.
The RTGS dollar has been hitting new lows on the black market in recent days.
It was trading between 11 and 12 against the U.S. dollar on the unofficial market on Monday versus a level of around 6 on the official interbank market.
Many Zimbabweans complain that goods and services are still priced in other currencies.
While more than 80% of Zimbabweans earn RTGS dollars, goods ranging from bricks to groceries have their prices pegged in U.S. dollars.
Inflation raced to 97.85% in May, eroding salaries and savings and causing Zimbabweans to fear a return to the hyperinflation era a decade ago.
Oil Prices News: Oil Gains Following Drops in US Crude Inventories
Oil Prices Gain Following Drops in US Crude Inventories and OPEC High Compliance Level
Global oil prices extended their 2 percent gains on Thursday after data showed U.S crude oil inventories declined last week.
The price of Brent crude oil, against which Nigerian oil is measured, gained 0.2 percent or 7 cents to $43.39 a barrel as at 12:10 pm Nigerian time. While the U.S. West Texas Intermediate (WTI) crude appreciated by 8 cent or 0.2 percent to $41.12 barrels.
Oil prices extended their three days gain after the American Petroleum Institute said the U.S crude inventories declined by 5.4 million barrels in the week ended October 9.
The report released after the market closed on Wednesday revealed that distillate stockpiles, which include diesel and heating oil, declined by 3.9 million barrels. Those stated drawdowns almost double analysts’ projections for the week.
“Much of the fall is due to the effects of Hurricane Delta shuttering U.S. production in the Gulf of Mexico, and as such, will be a transitory effect,” said Jeffrey Halley, senior market analyst, Asia Pacific at OANDA.
“Therefore, I am not getting too excited that a turn of direction is upon markets, although both contracts are approaching important technical resistance regions.”
Also, the report that the Organization of the Petroleum Exporting Countries (OPEC) and its allies, referred to as OPEC+ attained 102 percent compliance level with their oil production cuts agreements bolstered global oil outlook. Suggesting that demands for the commodity are likely not growing and could drag down prices in few weeks, especially when one factor in the reopening of Libya’s Sharara oil field, workers returning to operation in Norway and the Gulf of Mexico.
Oil Prices Gain on Tuesday Despite Expected Surge in Global Oil Supplies
Oil Prices Rise Despite Expected Surge in Global Oil Supplies
Oil prices gained on Tuesday despite Libya opening Sharara oil field for production, labour in Norway reaching an agreement with oil firms to return back to work and oil workers in the U.S returning to the Gulf of Mexico region after the Hurrican Delta.
Brent crude oil, against which Nigerian oil price is measured, gained 1.77 percent to $42.46 per barrel as at 11:15 am Nigerian time on Tuesday.
While the US West Texas Intermediate (WTI) crude oil gained 2 percent to close at $40.22 per barrel.
The improvement in prices was after oil prices plunged as much as 3 percent on Monday following a resolution reached by Libyan rebels and government to commence oil production at the nation’s largest oil field, Sharara Oil Field.
This coupled with labour agreement with oil firms in Norway was expected to boost global oil supplies and eventually weighed on prices and disrupt OPEC+ production cuts strategy.
However, prices surged after Nancy Pelosi said she would commence talks on $1.8 trillion stimulus package following President Trump’s return to the White House after he was rushed to hospital following a positive COVID-19 test.
Joe Biden Win Could Boost Oil Prices, Says Goldman Sachs
Oil Prices to Surge Once Joe Biden Wins -Goldman Sachs
Goldman Sachs, one of the world’s largest investment banks, has said Joe Biden win could boost global oil prices despite weak global economic outlook and COVID-19 negative impacts on the world’s growth.
The investment bank, however, remains bullish on both oil and gas prices regardless of the election outcome in November.
The bank sees oil and gas demand rising enough in 2021 to supersede election results but explained that Biden win could bolster prices by making production more expensive and more regulated for producers in the U.S.
In a note written by the bank’s commodities team on Sunday, it said “We do not expect the upcoming U.S. elections to derail our bullish forecasts for oil and gas prices, with a Blue Wave likely to be in fact a positive catalyst.”
“Headwinds to U.S. oil and gas production would rise further under a Joe Biden administration, even if the candidate has struck a centrist tone.”
Goldman Sachs explained that if incumbent, Trump, is re-elected with pro-oil and gas policies in place that “its impact would likely remain modest at best,” Goldman’s analysts wrote, “given the more powerful shift in investor focus to incorporate ESG metrics and the associated corporate capex re-allocation away from fossil fuels.”
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