The Zimbabwean economy is not very strong. The primary reason is increasing debt and depreciated national currency. GDP growth has been negative in recent years, and unemployment is high. Inflation is also a problem, and the government has had to print more money to try to keep up with it.
The role of the USD in the Zimbabwean economy is very big. It is estimated that about 60-80% of the country’s GDP comes from USD. The country’s currency, the Zimbabwe dollar, is also pegged to the USD. This means that when the USD goes up, so does the value of the Zimbabwe dollar.
The United States dollar is set to reduce in value by 2022, according to recent reports. This is due to a number of factors, including the country’s increasing debt levels and the ongoing trade war with China. As a result, Americans are likely to see their purchasing power decrease over the next few years.
In this article, we will review the main reasons for USD depreciation and its influence on the Zimbabwean economy.
Zimbabwean Businesses And Their Dependence On USD
The business environment in Zimbabwe is quite strong. The environment for making a business is supported and convenient. The infrastructure is good, and there are plenty of skilled workers available. Additionally, a stable local market and increasing investments are significant advantages of the Zimbabwean market. Overall, Zimbabwe is a good place to do business.
Zimbabwean businesses are depending on USD rates because the local currency, the Zimbabwe dollar, is not worth very much. One US dollar is worth about thirty Zimbabwe dollars. This means that if a business in Zimbabwe wants to buy something from a supplier in another country, it will need to use US dollars. The same is for the FX trading sector. Prestigious trading platforms such as Axiory which is quite popular for Zimbabweans, are mostly dependent on the USD as the major currency.
As of 2019, about 80 percent of companies in Zimbabwe are dependent on the United States dollar. This is mostly connected to permanent inflation and high fluctuations in the economic sector. The percentage of using ZAR as well as GBP is also common.
The USD currency rate in Zimbabwe has been changing rapidly since 2020. The country’s inflation rate was high, and the government was printing more money to try to keep up with the demand. This led to a decrease in the value of the USD, and it became difficult for people to buy imported goods.
If the USD keeps reducing, it will have a negative impact on Zimbabwean businesses. This is because most businesses in Zimbabwe rely on USD to buy goods and services from other countries. If the value of the USD decreases, it will become more expensive for businesses to import goods and services, which could lead to higher prices for consumers and less profit for businesses.
To conclude, the role of the USD in the Zimbabwean economy is significant. The main part of transactions is in USD. This includes everything from imports and exports to everyday purchases. As a result, the health of the USD has a direct impact on Zimbabwe’s economy.
USD Depreciation And Its Impact On Zimbabwe’s Economy
The USD is expected to reduce in value by the end of 2022. This is caused by tons of local and global factors. Additionally, the Federal Reserve is likely to raise interest rates several times over the next few years, which will make the dollar less attractive to investors. As a result, other currencies are expected to appreciate against the dollar, and the value of the USD is forecasted to decline.
As we mentioned, the dollar is the official currency in the country. As such, its depreciation has had a significant impact on the Zimbabwean economy. The most notable effect has been on inflation, which has soared in recent years due to the decreasing value of the dollar. This has led to higher prices for goods and services, as well as a decrease in purchasing power for consumers. The government has also been forced to print more money in order to keep up with demand, further exacerbating inflationary pressures. In addition, the depreciation of the dollar has made it difficult for Zimbabwean businesses to compete internationally and attract foreign investment. Stagnated economic sectors and significantly rising unemployment rates are other reasons for the USD depreciation in Zimbabwe.
In 2022, the country’s currency, the Zimbabwean dollar, lost a significant amount of value against the USD, and this had a ripple effect throughout the economy. Similar to most countries around the world, in Zimbabwe too, prices of daily goods significantly increased. The economic situation in Zimbabwe is still recovering from this event.
The Zimbabwean government is concerned about the depreciation of the USD. They feel that it could lead to inflation and hurt the economy. They also had negative forecasts on international trading prospects.