Zimbabwe’s black market exchange rate breaches $2 000 mark; retail prices soar

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By Alois Vinga

THE parallel market exchange rate this week breached the ZWL2 000 mark triggering price increases amid calls by experts for government to pay attention to the drivers of inflation.

A visit by to the black market dealers in Harare Central Business District (CBD) Wednesday revealed they were paying US$1: ZWL 1 700 as the generally accessible premium while those purchasing the greenback paid a high of US$1: ZWL2 200. On the official foreign currency auction market the Zimbabwe dollar is pegged at US$1:ZWL1026.

The development has left a section of the country’s citizens without access to the US$ facing the wrath of price increases which are unfortunately moving at a much faster pace as traders are hedging against speculative exchange rate hikes.

However, market analysts have downplayed the impact of the ZWL price hikes, insisting that since the economy is witnessing 70% transactions in US$, the impact will be minimum.

Commenting on the developments, economic expert, Dr Prosper Chitambara said the obtaining parallel market premiums are a cause for concern.

“The current premiums are not sustainable but of course ultimately, money supply is the main cause of the depreciation. Lessons drawn from the past shows that the factor has always driven exchange rate depreciation.

“ZWL liquidity has surged on account of a number of factors such as government’s payments to contractors, recent wave of salary increases in local currency. Due to the fact that we are not pre-dominantly dollarized, recipients of such monies rush to the parallel market to exchange for US$ piling pressure on ZWL,” he said.

Chitambara said such liquidity triggers instability amid calls for the government to keep a tight lid on expenditure.

“In the short term it may however be difficult to tame the situation unless we urgently convene a social contract. It’s a difficult situation, we need to address the drivers of inflation specifically money supply and indiscipline.

“In the long term efforts must be seriously invested towards addressing the informal economy challenge bedevilling the economy,” he said.