THE Zimbabwean dollar has continued its dramatic meltdown
as it weakened even further against the greenback this week, 263 days after it
was made the sole legal tender.
The local unit has plummeted from ZW$29 to the United
States dollar to ZW$40 this week on the parallel market as the authorities
struggle to defend the increasingly unstable domestic currency.
Government freed the exchange from February 20 last year as
part of currency reforms. It then brought back the hitherto demonetised
Zimdollar on June 24, unexpectedly banning the multi-currency system which
ensured exchange rate stabilisation and ended hyperinflation in 2009. However,
the currency reforms have failed to shore up the local unit which is in
freefall.
Currency and exchange rate volatility have had a serious
impact on the economy and people’s livelihoods with a recent wave of price
increases of basic commodities such as bread and cooking oil.
Standards of living for ordinary Zimbabweans and business
operations have deteriorated, amid tumultuous price escalations and rapid
erosion of income with year-on-year inflation nudging towards the 500% mark.
In a desperate bid to stabilise the exchange rate, government
this week set up a “Currency Stabilisation Taskforce” among a cocktail of
measures.
Finance minister Mthuli Ncube announced this week the
formation of the taskforce spearheaded by his ministry and the Reserve Bank of
Zimbabwe and which will include members of the Monetary Policy Committee and
Presidential Advisory Council. The new taskforce will be chaired by Ncube.
Among the measures announced by the Treasury boss is the
introduction of a “managed Floating Exchange Rate System”, in which an electronic
forex trading platform based on the Reuters system has been put in place with
immediate effect.
“Zimbabwe has had no transparent and effective foreign
exchange trading platform for a long time. Consequently, official rates have
not been effectively determined, while a thriving parallel market has
developed. To correct this anomaly, an electronic forex trading platform based
on the Reuters system is being immediately put in place,” Ncube said.
“This platform will allow foreign exchange to be traded
freely among the banks and permit a true market exchange rate to be
determined.”
The move, however, has not convinced economist analysts,
with Godfrey Kanyenze pointing out that there is a lack of political will to
effectively address the crisis.
“We have always said that this (currency volatility) will
go in one direction. There is no respite despite forums such as the Tripartite
Negotiating Forum and the Political Actors Dialogue. These forums are just a
semblance of doing something. There is no political will,” Kanyenze said.
The setting up of the currency stabilisation taskforce,
Kanyenze observed, is mere window dressing which does not tackle the core issue
of corrupt cartels which have amassed massive wealth while wreaking havoc in
the economy.
On the sidelines of the press briefing to announce measures
to stabilise the currency, Reserve Bank of Zimbabwe governor John Mangudya told
businessdigest that there are forces that go beyond the monetary authorities
which cause the volatile movement of the exchange rate.
“The monetary factors cannot fully explain the depreciation
of the local currency which means that there is another X-factor, which is
called the residual factor in statistics,” Mangudya said.
“That residual factor seems to be bigger than the role
played by monetary authorities in this economy. Who are those moving the
exchange rate and for what purpose? So what we are saying is that the Zimbabwe
foreign exchange market seems to be a complex market where non-monetary factors
and monetary factors seem to be playing themselves out and then they come up
with an exchange rate. This is what we are studying and we need to go deeper
into the issue.”
The depreciation of the local currency has amplified calls
from various quarters, including the Zimbabwe Congress of Trade Unions, for the
government to ditch the weakening local currency for the South African rand.
However, Ncube this week shot down the proposal, saying the
process of adopting the rand is cumbersome and time consuming.ZCTU president
Peter Mutasa said the rapid depreciation of the local unit justifies its call
for workers to be paid in forex.
“There is no other way out for workers after the
liberalisation of the exchange rate. Workers must fight for foreign
currency-based salaries,” Mutasa said. “The ZCTU has carried out consultations
and received a mandate to lead the fight against oppression and slavery through
various forms of action.”
He added that the government has messed up the economy with
prices now beyond the reach of many who are struggling to make ends meet.
Zimbabwe Independent
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