- ZWL dropped by 9% to 458.3653 from 416.2890
- Started trading at 57.3582
- YTD losses widen to 75%
Harare- Barely one week after the gold coins debuted in the market, the Zimbabwe dollar witnessed a second record fall of 9% since the beginning of the year to settle at 458.3653 on the latest RBZ-governed auction market from 416.2890 during the prior week.
This raise concerns over whether the gold coins will be able to bring stability to the under-fired currency or is the manifestation that the Zimbabwe dollar and stability are parallel, never meant to meet.
The gold coins were introduced by the Central Bank to ease inflationary pressures on the ailing currency, a situation that has been fueling the black market activities bringing instability to the local currency.
However, this seems to be far from being achieved. Maybe the only way for the Zimbabwe dollar to have stability is its temporal abandonment.
On the parallel market where most of the activity takes place, the Zimbabwe dollar has already widened losses to ZWL 900 while others charge a margin above ZWL 1000 against a single US dollar.
When the auction market commenced on 23 June 2020, the Zimbabwe dollar started trading at 57.3582 but to date, losses have reached a peak of 88%.
“The adoption of a foreign currency auction system is expected to bring transparency and efficiency in the trading of foreign currency in the economy,” RBZ Governor John Mangudya said during the launch of the auction system.
However, due to the deficiency of the auction market to provide funds as it is underfed, the system has failed dismally to bring foreign currency trading sanity to the economy, fueling black market activities.
Due to some allotments that take long up to 9-weeks, companies have resorted to the black market to source the greenback at inflated prices fueling inflationary pressures.
Due to fiscal indiscipline from the Treasury and Central Bank, proper management of exchange rates has been unfounded while tightening broad money and provision of sufficient foreign currency to businesses remain a nightmare. This propped the ZWL to lose most of its fundamental duties such as acting as a measure of value, as a store of value and as a medium of exchange as the market prefers the stable US dollar.
Meanwhile, US$19 million was allotted this week, down from the US$24 million allotted last week signalling the scarcity of the greenback in the RBZ coffers. This year, the government announced that only bids for available funds will be taken.
The highest rate received was ZWL 500 on the main auction while the lowest rate was ZWL 420 against the single US dollar.
Raw material continued getting the lion’s share followed by machinery and equipment and consumables.
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