The decline in the value of the Zimbabwean dollar in 2023 is likely to extend into 2024, as experts expect an increase in the cost of doing business and production and increased pressure on the exchange rate.
The local currency has been in free fall this year, losing record values against the dollar over the past year.
For example, in June this year the zimdollar suffered a bloodbath, prompting US-based applied economics professor Steve Hanke to warn of hyperinflation after monthly inflation reached 102% by his measure.
This week, economist Prosper Chitambara told Newshawks that the loss of the value of the Zimbabwean dollar would likely derail the country’s business environment, thereby deteriorating living standards.
“As long as we are in a dual-currency framework, and the fact that most people have lost confidence, I think this will put a lot of pressure, even next year, on the exchange rate. And also next year, given the El Niño event,” Dr. Chitambara said. This leads to a decline in agricultural production, which will affect prices, government spending and imports.”
“So all of that will have a destabilizing effect. This will also weaken the local currency. Therefore, next year we expect the trend to continue in terms of the local currency due to the expected challenges regarding the El Niño phenomenon.
“The government will have to import [food] Even electricity generation will be affected. This will mean that companies will be under pressure to continue using generators, which will again affect the cost of production and the cost of doing business and will also affect inflation which will have a negative impact on the local currency.
The Zimbabwean dollar continued to weaken in the last quarter of 2023. According to an economic report released by the Zimbabwe Coalition on Debt and Development (Zimcodd), in September 2023 the Zimbabwean dollar lost 15.7% of its value against the US dollar closing in on the Zimbabwean dollar. Month at 1 USD: 5466.75 ZW.
This was a significant monthly decline compared to August 2023 when the local unit lost slightly 1.9% to close at US$1:4,608.11.
“In alternative markets, the ZIM dollar lost at least 15% of its value to close the month at an average of ZW$1: USD 7,100 from ZW$1: USD 6,000. As a result of the exacerbated depreciation of the ZIM dollar, especially in alternative markets, exchange premiums in The parallel market is expanding now.
“The increasing Zimdollar depreciation pressures since early September 2023 stem from the resumption of Zimdollar payments to government contractors and other service providers who in turn are dumping the local unit on the street in search of (US dollar) value.”
According to the analysis, Zimdollar’s depreciation pressures were driven by human behavior such as negative perceptions fueled by the disputed August 2023 general election, as well as excessive, unproductive rent-seeking supported by multiple prevailing exchange rates.
For example, in addition to different exchange rates for RTGS balances, cash balances (bond notes), and mobile money balances, the Reserve Bank of Zimbabwe (RBZ) recently introduced digital tokens backed by gold (ZiG).
“ZiG is an additional payment method for settling local transactions (purchase and sale of goods and services). These digital tokens (gold e-wallets) have their own exchange rate derived from the prevailing international price of gold,” the statement said. analysis.
“Zimdollar depreciation pressure is expected to remain high in the coming months as fiscal spending swells to protect the economy and citizens from expected climate shocks, domestic shocks (energy shortages), public debt crisis, and weak global geopolitics.”Also, recurring domestic electricity shortages While global crude oil prices remain high, it increases energy costs, slows industrial activity, and threatens price stability.