Second death knell for Zimbabwe dollar?
Zimbabwe authorities continue to struggle to inject confidence in the country’s currency, which has weakened by a third against the dollar in the official market and by about 40 per cent in the parallel market since January. Zimbabwe’s Central Bank Governor Mangudya said the currency turmoil on the parallel market over the past three weeks, which has caused a wave of exchange-rate volatility, was driven by holders of an increased supply of the local currency rushing to buy US dollars at the end of the year. Media reports suggest authorities plan new measures to stem the decline in the Zimbabwe dollar, which could be announced at the country’s first central bank meeting next week. Dr. Prosper Chitambara, Independent Economist joins CNBC Africa for more.
Wed, 24 Jan 2024 11:08:08 GMT
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AI Generated Summary
- The Zimbabwean dollar has significantly depreciated against the US dollar, leading to exchange-rate volatility in both official and parallel markets.
- Authorities are planning new measures to address the currency crisis and stem the decline in the value of the Zimbabwean dollar.
- The key to restoring confidence in the currency lies in implementing market-led reforms, fiscal and monetary discipline, and institutional reforms to rebuild trust in the local economy.
Zimbabwean authorities are facing a daunting challenge as they endeavor to restore confidence in the country's currency, which has seen a significant depreciation against the US dollar. Since the beginning of the year, the Zimbabwean dollar has weakened by around 30% in the official market and approximately 40% in the parallel market, causing a wave of exchange-rate volatility. The country's Central Bank Governor, John Mangudya, attributed this currency turmoil to an increased supply of the local currency being used to purchase US dollars, especially towards the end of the year. In response to this crisis, authorities are reportedly planning new measures in an attempt to stem the decline in the value of the Zimbabwean dollar. These measures are expected to be announced at the upcoming central bank meeting next week. Dr. Prosper Chitambara, an Independent Economist, shared his insights on the situation in Zimbabwe during an interview on CNBC Africa. Dr. Chitambara highlighted the importance of implementing market-led reforms, enhancing fiscal and monetary discipline, and undertaking institutional reforms to restore confidence not only in the currency but also in the local economy. He emphasized the need for sustained macroeconomic and institutional reform efforts to rebuild trust in the Zimbabwean currency, acknowledging that it would take time to achieve significant progress. Despite the challenges faced by the country, Dr. Chitambara expressed optimism about the potential for substantive progress in implementing necessary reforms in the current year, particularly following the establishment of a structured dialogue platform for arrears clearance and the government's commitment to various macroeconomic, governance, and institutional reforms. Overall, the path to restoring confidence in the Zimbabwean currency requires a comprehensive and sustained effort on multiple fronts to address underlying economic issues and rebuild trust among investors and the public.
