By Alois Vinga
THE depreciation of the Zimbabwean dollar has begun to ease on both the parallel and official market following months of a sustained downward spiral which saw the local currency losing more than half of its value, latest market data has shown.
Between April and July 2022 the Zim$ plummeted from around ZW$300: US$1 to a high of ZW$800:US$1 on the parallel market. In comparison, on the Reserve Bank of Zimbabwe (RBZ) foreign exchange auction the rate depreciated from as low as ZW$150 to ZW$400 against the greenback.
Recent interactions with the parallel market dealers by NewZimbabwe.com show that rates have been stagnant and, in some cases, traders have even been failing to pay the ZW$800:US$1 mark when purchasing the greenback with most dealers instead offering much lower rates such as ZW$650 to ZW$700 against the greenback for bank transfers.
The latest trading update released at the close of business by the RBZ auction also shows that in the recent weeks, the official exchange rate has hovered around the ZW$400 margin to close the week at ZW$494,98 against the greenback.
Weekly trades on the Main Auction saw 127 bids being accepted with a total value of US$14 078 262.
Allotments were tilted in favour of productivity spurring needs with raw materials receiving US$7,3 million , machinery and equipment US$2,4 million, Consumables US$1,6 million, Retail and Distribution US$635 402, pharmaceuticals and chemicals US$308 449, Paper and packaging US$159 238.
A similar trend was sustained on the SME auction where a total US$2,9 million was allotted with a huge chunk going towards meeting the productivity cause.
Commenting on the latest developments, economist doctor Prosper Chitambara attributed the current Zim$ depreciation slowdown to the raft of measures implemented by the monetary authorities.
“The halting of bulk payments in local currency to contractors coupled with the policy directive to turn down invoices benchmarked on predictive future price hikes by the government contractors has positively contained excess bad money which has fuelled the exchange rates depreciation in the past.
“Such excess cash was used for speculative purchases of foreign currency on the markets and in the process fuelled Zim$ depreciation which in turn prompted inflation to rise. The grand total allotted on auction at US$16,6 million shows the commitment by the bank to allot available funds and avoid surging backlogs,” he said.
Economist Persistence Gwanyanya however attributed the reduced quantum of allotted funds to the tight Zim$ liquidity constraints in the economy.
“We are slowly beginning to witness a resurgence of the two exchange rates now moving towards equilibrium. Current auction payment of allotted funds remains within the committed timeframes with the 103rd Main auction having been paid up considering that we are just at the 106th auction,” he said.