Zimbabwe's dollar has kicked off the new year with a significant depreciation, dropping over 40% on the black market due to a persistent high demand for foreign-exchange that exceeds supply.
Persistence Gwanyanya, a member of the central bank’s monetary policy committee, attributes this to a combination of factors. Gwanyanya expressed concern over the situation not normalizing soon and emphasized the need to manage the demand for forex and allocate resources judiciously.
Since reintroducing its currency in 2019, Zimbabwe has faced challenges in stabilizing it, leading locals to prefer the US dollar for transactions ranging from food to medicines. The government managed to stabilize the fluctuating exchange rate with interventions in June, including a requirement for companies to pay taxes in local currency.
However, the exchange-rate volatility has been blamed for fueling inflation, with consumer prices rising 26.5% in December compared to the previous year.
On Monday, the local currency was trading at Z$10,900 per US dollar, a stark contrast to the official exchange rate of Z$6,467 per US dollar.
Source: bnnbloomberg.ca