By Memory Mataranyika & Tawanda Karombo for News24.com
Zimbabwe’s free-falling currency, the Zimbabwe dollar, is imploding, forcing retailers to scramble for answers by doubling prices compared to last week and causing fresh headaches for President Emmerson Mnangagwa’s administration ahead of elections scheduled for later this year.
The Zimbabwe dollar lost ground by over 70% within a week, falling to above 1USD:ZWL2000 on the streets of Harare on Monday. On the official foreign currency auction market run by the central bank, the Zimbabwe dollar is pegged at 1USD:ZWL1026.
The latest parallel market volatility for the Zimbabwean unit of exchange comes a few days after the central bank governor, John Mangudya, spoke about introducing a gold-backed digital token to fight inflation and value loss in the local unit of exchange.
Analysts say the move has fallen short of addressing plunging confidence in the Zimdollar.
Chiedza Madzima, head of Africa research at Fitch Solutions, said in an interview on Monday:
The latest plunge in the value of the Zimbabwe dollar has sparked a rush by holders of the local currency to offload it and snap up US dollars from the streets of Harare.
Currency traders said demand for US dollars has surged in the past two days. On the other hand, business leaders say they are now bracing for a backlog in payments for imported raw materials.
The Confederation of Zimbabwe Industries (CZI) industry grouping says “the emerging instability of the local currency as reflected by high depreciation of the exchange rate in March 2023 will also be reflected in the degree of dollarisation” across the economy.
The knock-on effects of Zimbabwe’s fresh currency volatility have been more pronounced on the retail sector, store managers and executives said.
On Monday and Tuesday, retail chain managers were frantically trying to contain the implosion in the Zimbabwe dollar by doubling up prices of goods and commodities.
“We changed prices yesterday in the afternoon and by this morning we had to change [again]. The fluctuation has been intense and it is giving us pressure on the operations side,” an executive with a retail chain in Harare said.
Economists say Zimbabwe’s economy will worsen ahead of elections scheduled for around August this year. Others said a crippling shortage of foreign currency on the market had resulted in the latest spike in exchange rates.
“The wheels have totally come off with the black market rate hitting a new low of 1:2000, a premium of 80% over the official rate. There is pandemonium in shops as prices skyrocket. Real inflation is now at 400% , no wonder they have resorted to a blended rate to hide real figures,” former Finance Minister and opposition leader, Tendai Biti, said on Twitter.
According to Madzima, the currency and economic volatility will worsen as Zimbabwe gears up for elections, after Mnangagwa said at the weekend that he will gazette the election date at the end of May.
“Investors will be watching closely the pre-election spending and the trajectory of domestic ZWD and US dollar availability in the months ahead,” Madzima said.
Zimbabwe could get some foreign currency reprieve though from tobacco sales which have just opened but economists insist that the country’s “import needs remain high and currency depreciation will likely rise” ahead of elections.