Zimbabwe’s local dollar has weakened 21% against the greenback in official trading this week, narrowing the gap in exchange rates to the popular parallel market.
The Zimbabwe dollar is now trading at Z$8 240 per US dollar, much lower than the Z$6 467 per greenback offered on Monday, according to data available Thursday on the central bank’s website. That makes it easily the world’s worst-performing currency this week.
The decline has helped narrow the gap to the unofficial exchange rate, which fell 40% this week. A single Zimbabwe dollar changes hands at Z$10 900 per US dollar on the streets of Harare, the capital, according to ZimPriceCheck.com, a website which tracks both official and unofficial rates.
Authorities see a gap of 10% to 20% between the official and unofficial exchange rates as acceptable. Zimbabwe has been struggling to stabilize its currency since its return into circulation in 2019.
A range of factors, including the end of tobacco sales and a softening of global commodity prices, has affected US dollar inflows into the southern African nation, causing its exchange rate to spiral, a member of the central bank’s monetary policy committee said earlier this week.
An overvalued exchange rate also has the effect of making goods and services more expensive in US dollars for formal businesses. Under the country’s laws, formal businesses are compelled to use the official exchange rate and can only add a 10% profit margin.