The Zimbabwean dollar has been rapidly losing value against the U.S. dollar in recent weeks on the Reserve Bank of Zimbabwe’s foreign exchange auction market. Exchange rates show that over the past week, the Zim dollar tumbled by 43% closing the gap between the official and parallel markets.
On Tuesday, the official exchange rate hit ZW$3,673 to the U.S. dollar, down 42.5% in just one week. Two weeks ago, the Zim dollar depreciated 34% in one week, and three weeks ago it fell another 14% on top of the previous 36.4% decline.
The parallel exchange rate now stands at around ZW$4,000 to the dollar, while retail outlets are demanding even higher premiums to hedge against future uncertainty.
Economist Prosper Chitambara says the recent depreciation of the Zim dollar shows improvements in how the RBZ auction system works as it reduces arbitrage opportunities and corrects market distortions. However, he warns that more discipline is needed on money supply to sustain the gains.
The auction system allotted US$4.9 million last week, with a large portion going to the raw materials, machinery and equipment sectors. Chitambara says while the recent moves are a step in the right direction, authorities must implement real solutions around money supply policies for any benefits to last.
