Zimbabwe Dollar Depreciates Following Disputed General Election
Since the contested general election held last month, the Zimbabwe dollar has been experiencing a gradual depreciation on both the official and parallel forex markets. Prior to the harmonized elections on August 23, the official exchange rate was at US$1 to $4,568,385.3, while the parallel rate stood at US$1 to $6,500.
As of Friday, the Zimbabwe dollar had further depreciated to US$1 to $4,714,534.1 on the official forex market and US$1 to $8,000 on the parallel market.
Persistence Gwanyanya, a member of the Reserve Bank of Zimbabwe’s monetary policy committee, dismissed the exchange rate decline as purely sentiment-driven, with no significant changes occurring on the economic front. Gwanyanya mentioned that the exchange rate had started to stabilize even before the election date, and while there was a temporary depreciation after the elections, the market rebounded due to the lack of actual changes in the economy, real sectors, and fiscal monetary prudence.
Gwanyanya emphasized the need for continued tight monetary policies to maintain the temporary stability and encourage the exchange rate to firm up again. The central bank has been implementing hawkish monetary policies to address the depreciation of the currency by mopping up local currency liquidity and controlling the money supply.
Economist Prosper Chitambara stressed the importance of fiscal discipline in maintaining exchange rate stability. He emphasized the need to control public spending and enhance the efficiency of government projects undertaken by contractors. Chitambara also highlighted the significance of managing money supply growth, particularly during the upcoming agricultural season associated with increased public spending and monetary expansion.
The depreciation of the Zimbabwe dollar following the disputed general election has prompted discussions on the importance of fiscal discipline, controlling money supply growth, and maintaining tight monetary policies to stabilize the exchange rate.