Zimbabweans holding on to US dollar because they have been clobbered before


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One of the reasons why the Zimbabwe dollar is fast losing value is that Zimbabweans have lost all their savings before. They are therefore seeking and holding the United States dollar as a store of value, Zimbabwe’s Monetary Policy Committee says.

The committee which met on Friday said: “The existence of strong economic fundamentals suggests that the recent exchange rate shocks are a manifestation of negative sentiments or perceptions attributable to people’s past experiences with hyperinflation and inevitable losses incurred during currency reforms.”

The Committee noted that the erosion of people’s savings due to inflation compelled them to try and avoid similar losses by holding the US dollar as a store of value.

It therefore welcomed the decision by  the government to come up with measures to enhance confidence in the economy, deal with market indiscipline and increase the demand for the local currency, which it said will go a long way  in buttressing  the  current  tight  monetary  policy  stance,  restoring  confidence  in  the economy, taming  market  indiscipline,  stabilising  inflation  and exchange  rates  and creating a conducive environment to support the envisaged economic growth rate of 5.5% in 2022.

President Emmerson Mnangagwa said the continued decline of the Zimbabwe dollar did not make any sense because all the fundamentals were right.

The Zimbabwe dollar today dropped to $165.99 to the United States dollar on the foreign currency auction but it is trading at between $320 and $400 on the black market.

Below is the full statement following the Monetary Policy Committee meeting.

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Charles Rukuni
The Insider is a political and business bulletin about Zimbabwe, edited by Charles Rukuni. Founded in 1990, it was a printed 12-page subscription only newsletter until 2003 when Zimbabwe's hyper-inflation made it impossible to continue printing.

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