DEMAND for the Zimbabwean dollar continues to soar as more businesses and individuals seek to transact using the local currency, which has regained its lost value for the third consecutive time at the wholesale foreign currency auction to settle at US$1:ZWL$5,395 this week from US$1:ZWL$5,739 last week.
This is seen as a strong indication of the market’s positive response to a series of policy interventions put in place by monetary authorities to mop up excess liquidity and restore macro-economic stability.
The stability of the exchange rate is expected to anchor price stability going forward, experts say, and drive the demand for local currency in domestic transactions, which economic agents have lately been avoiding due to its volatility.
The development has already halted price increases thereby easing the pressure on consumers who expect the prices to drop in the short to medium term.
Based on the Reserve Bank of Zimbabwe (RBZ) update yesterday, the highest bid rate at the wholesale auction system received was ZWL$5 550 to the US-dollar while the lowest was ZWL$5 200. This is a huge drop when compared to ZWL$6,926 in the last three weeks.
Economic analysts say the sustained strengthening of the local currency is critical for stabilising the market, restoration of consumer purchasing power and sustaining adequate aggregate demand for products and services.
A snap survey conducted by Chronicle news crew in Bulawayo yesterday revealed that more business that previously pegged prices exclusively in forex, are now enticing customers to transact in local currency. This comes at a time when big supermarkets are now rejecting South African rand coins, preferring to use Zim dollar bond notes.
A number of small retail outlets have also embraced the local currency and are seeking to acquire Point of-Sale machines (POS). Several of these businesses have now put notices at their premises indicating that they now accept mobile money payment and swipe.
In the past such businesses, mostly located in the downtown district, led the defiance against using local currency but are now selling their products using the multi-currency and are mostly applying the prevailing bank rate. However, some who have embraced the local currency were using a high parallel market rate of above 1:7000, which is a drop from a peak of about 1:10 000.
“The Zimdollar is now honey. It has restored its attractiveness. Kudos to His Excellency President ED Mnangagwa for a raft of measures to shore up stability,” said Confederation of Zimbabwe Retailers president Mr Denford Mutashu.
In its latest inflation and currency development update, the Confederation of Zimbabwe Industries (CZI) also said the measures introduced by the Government have halted the free fall of the local currency, making it important for the Government to stay the course and fully implement the measures.
It noted that the liberalisation of the exchange rate has managed to shrink the monthly average exchange rate premium from 92 percent in May 2023 to 38 percent in June 2023.
“What is critical now is ensuring that the implementation of the current reforms is geared at convergence between the official and parallel market first and then the appreciation objective follows,” said CZI.
An elderly woman who runs a formal apparel shop in Bulawayo’s downtown district acknowledged the need to embrace the local currency.
“As long as I benefit from you, you will also benefit from me. This is your country and I am trying to make a living. We have to learn to respect your economy as I would want you to respect mine,” she said.
“I will charge you in US dollars but I will convert it to the prevailing and legal bank rates. Please tell your family and friends to accept what our community seeks to promote.”
While she and her fellow community members shared the same ideas and sentiments, such was not the same with local “greedy” entrepreneurs who recently priced their goods using obscene black-market rates of above $10 000 to the USD.
Among the recent strategic interventions introduced by authorities include a directive for all import duties to be paid in Zimbabwe dollars, except for luxury items, transfer of external payment obligations from the Reserve Bank of Zimbabwe (RBZ) to the Treasury and introduction of the wholesale foreign currency auction for banks.
Further, the Treasury has also directed that all Government institutions must collect fees in local currency and also charge for services in local currency. It also said 50 percent of corporate tax payments should be made in Zimbabwe dollars while the Central Bank raised its bank policy rate from 140 to 150 percent.
Finance and Economic Development Minister, Professor Mthuli Ncube, has said the measures were meant to ensure effective implementation of the earlier policy interventions.
Expectations are that the exchange rate (official and parallel market), which recently took a battering from the negative impact of excess liquidity in the market, will strengthen in favour of the local currency going forward.
In yesterday’s update US$20 million was on offer attracting 11 bids worth $4,3 million accepted while $4,1 million allotted.
Recently the RBZ launched a transition to a market-based exchange rate mechanism by injecting foreign currency in the interbank market through the wholesale foreign currency auction system and removed the limits on forex trading margins.
According to financial analysts this was viewed as the next step to achieving stability and boost the Zimbabwe dollar demand.