Zimbabwe to take “major steps” to protect local currency today

Zimbabwe is expected to take major steps today to protect its currency which has been under siege over the past few weeks with the black market rate now double the interbank market rate.

The Zimbabwe dollar, which was re-introduced eight months ago, has been under siege with some people, especially those from the opposition, pushing for redollarisation arguing that the economy is already redollarising on its own.

Finance Minister Mthuli Ncube has repeatedly said there is no going back on de-dollarisation but the process might take longer than expected.

Reserve Bank of Zimbabwe governor John Mangudya has said the process might take up to five years.

The Zimbabwe dollar was trading at par with the United States dollar in October 2018 but was officially pegged at 2.5 to 1 in February last year before being floated on the interbank market.

Business has, however, complained that the interbank market is unrealistic and is being manipulated by the Reserve Bank of Zimbabwe.

Yesterday the interbank market was 18:1 but h black market was more than double at 38:1 while the Old Mutual Implied Rate, the rate used to measure investor sentiment, was 55:1.

Yesterday’s exchange rate movement was reminiscent of 2008 where the rate could change three or four times a day.

It kicked off at 36:1 but ended the day at 38:1 The interbank rate was 18:1.

Zimbabwe set up a monetary policy committee in September to remove economic distortions and ensure price stability but so far it has been struggling to achieve this.

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