Zimdollar wreaks havoc

THE Zimbabwean dollar has continued its dramatic meltdown as it weakened even further against the greenback this week, 263 days after it was made the sole legal tender.

The local unit has plummeted from ZW$29 to the United States dollar to ZW$40 this week on the parallel market as the authorities struggle to defend the increasingly unstable domestic currency.

Government freed the exchange from February 20 last year as part of currency reforms. It then brought back the hitherto demonetised Zimdollar on June 24, unexpectedly banning the multi-currency system which ensured exchange rate stabilisation and ended hyperinflation in 2009. However, the currency reforms have failed to shore up the local unit which is in freefall.

Currency and exchange rate volatility have had a serious impact on the economy and people's livelihoods with a recent wave of price increases of basic commodities such as bread and cooking oil.

Standards of living for ordinary Zimbabweans and business operations have deteriorated, amid tumultuous price escalations and rapid erosion of income with year-on-year inflation nudging towards the 500% mark.

In a desperate bid to stabilise the exchange rate, government this week set up a "Currency Stabilisation Taskforce" among a cocktail of measures.

Finance minister Mthuli Ncube announced this week the formation of the taskforce spearheaded by his ministry and the Reserve Bank of Zimbabwe and which will include members of the Monetary Policy Committee and Presidential Advisory Council. The new taskforce will be chaired by Ncube.

Among the measures announced by the Treasury boss is the introduction of a "managed Floating Exchange Rate System", in which an electronic forex trading platform based on the Reuters system has been put in place with immediate effect.

"Zimbabwe has had no transparent and effective foreign exchange trading platform for a long time. Consequently, official rates have not been effectively determined, while a thriving parallel market has developed. To correct this anomaly, an electronic forex trading platform based on the Reuters system is being immediately put in place," Ncube said.

Source: Zimdollar wreaks havoc (13/03/20)