THE value of the United States dollar against the Zimbabwe
dollar on the parallel market has nosedived due to a drop in demand, economists
have said.
The depreciation comes hardly a week after the Reserve Bank
of Zimbabwe (RBZ) reintroduced the use of foreign currency for local
transactions in addition to abandoning the managed floating exchange rate as
part of the central bank’s measures to deal with the coronavirus (Covid-19)
pandemic.
Parallel market rates for the US dollar, which had gone up
to as high as 1 US$ to $41 for electronic transfers and US$ to $32 in cash last
week, have since tumbled to as low as US$ to $34 for electronic transfers and
US$ dollar to $25.
Speaking to the Daily News yesterday, economist Gift Mugano
said the tumbling US$ rates on the parallel market was not surprising because
there has been a drastic drop in demand due to the coronavirus (Covid-19)
pandemic.
“The drop in rates is the function of demand. Demand is now
very low because of the Covid-19 lockdown and there is a significant decline in
the number of people who need US dollars considering that there is no
significant production in industry,” Mugano said.
He added that there was no guarantee that the Zimbabwe
dollar would remain in use post-lockdown.
“This development has two end possibilities. After the
lockdown, the Zimbabwean dollar might be wiped out for good because the economy
would have dollarised on its own.The government might have been too embarrassed
to admit that the local currency has failed and are hiding behind Covid-19. It
is very possible that after this lockdown, retailers would have dollarised,”
Mugano said.
RBZ re-introduced the use of foreign currency for domestic
transactions in a bid to tap into private foreign currency savings as the
country gears up for the battle against the novel coronavirus nine months after
the government outlawed the use of foreign currency as legal tender.
Mugano said if the Zimbabwe dollar remains in use after the
lockdown, it would lose value dramatically when demand for the US dollar shoots
up as expected.
“If we do not have enough US dollars after the lockdown, we
might be forced to continue using the Zimdollar and the US dollar parallel
market rate will shoot up due to huge demand.However, chances are that the
Zimbabwean dollar has no possibility of holding fort,” he said.
Zimbabwe Coalition on Debt and Development (Zimcodd)
executive director Janet Zhou told the Daily News that there was currently
little or no demand for US dollars due to the lockdown.
“I doubt that we will do away with the Zimdollar, but we
may continue with the multi-currency system because the Covid-19 impacts are
not just short term; there are long term economic impacts to grapple with. I do
not think the government is in a position yet to pay its employees in US$ hence
completely wiping out the local currency may not work at this stage,” Zhou
said. Daily News
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