Zimbabwe’s beleaguered currency at the weekend tumbled by more than 50% against the United States dollar on the parallel market for foreign currency that is the only sure source of hard cash for both individual and corporate buyers in the country.
Zimbabwe is grappling an acute foreign-currency shortage — the result of a seven-year old economic crisis that has also spawned shortages of food, fuel, essential medicines, electricity and just about every other basic survival commodity.
The American unit was last Saturday selling for Z$410 000 on the illegal but thriving black market in the second-largest city of Bulawayo, up from the Z$200 000 to Z$300 000 the greenback was fetching the previous day.
The South African rand, the second-most-sought-after currency in Zimbabwe after the greenback, was selling at Z$70 000 up from the Z$50 000 to Z$55 000 it was selling for the previous Friday.
But rates on the official market remained fixed, with the American dollar fetching Z$101 196 while the rand, the currency of Zimbabwe’s biggest trading partner and supplier of goods, remained stable at one unit to Z$14 857.
Black-market traders said the movement in rates were because of huge demand especially of rands by locals wishing to go to neighbouring South Africa to buy mostly basic commodities that are either in short supply or too expensive in Zimbabwe.
“Many people are buying the rand. As we are nearing the end of the month when more people have cash to buy foreign currency, we expect more demand for American dollars and rands as people want to go shopping across the borders,” said Nokuthula Sibanda, a Bulawayo foreign-currency black-marketer.
The fall of the Zimbabwe dollar on the parallel market is expected to push up prices of fuel and most basic goods that are imported into the country using hard cash mostly sourced from the black market.
Bulawayo economist, Erich Bloch, who is an adviser to the Reserve Bank of Zimbabwe, called for a devaluation of the dollar on the official market to try to attract hard cash into official channels and limit black-market activity.
He said: “This calls for the devaluation of the dollar. People should also be encouraged to use electronic money as a way of starving the illegal foreign-currency dealers, but that means there should be some incentives for using methods like bank-certified cheques. The central bank can set the ball rolling by introducing such incentives for banks themselves.”
Previous adjustments of the official exchange rate have failed to stem the black market, with many economists saying the solution does not lie in tinkering with the exchange rate but in addressing underlying economic and political problems hampering the hard-cash-generating export sector. — ZimOnline