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Black market running amok

by Staff reporter
20 Sep 2019 at 08:21hrs | Views
Claims by under-pressure Finance minister Mthuli Ncube that his much-criticised policies will start bearing fruit towards the end of the year look increasingly nonsensical, as the wobbly Zimbabwe dollar has crashed against the US unit on the parallel market – precipitating massive price hikes.

This comes as the Reserve Bank of Zimbabwe (RBZ) has unveiled a new set of measures that it hopes will contain the runaway inflation and price hikes in the country.

If you thought Argentina's currency crisis was bad, spare a thought for Zimbabwe.

Measures to protect the Zimbabwe dollar - including sky-high interest rates - seem to be coming to naught.

Since the southern African nation allowed formal trading of what was effectively a new currency in February, the unit has depreciated to 13.52 per U.S. dollar, from 2.50. That equates to a loss in value of 82% - easily the worst performance globally, excluding hyperinflationary Venezuela.

It's even weaker on the black market, changing hands on the streets of Harare, the capital, at 16.60, according to marketwatch.co.zw, a website that monitors the parallel rate.

The rout makes that in Argentina, where the government imposed capital controls to stem the peso's 26% decline last month, seem relatively mild.

Zimbabwe's foreign-exchange scarcity has only worsened since long-standing ruler Robert Mugabe, whose funeral was held over the weekend, fell from power almost two years ago. Such is its severity that the central bank raised interest rates to 70% on Friday, from 50%.

That may do little for consumption in an economy the International Monetary Fund says will contract 2.1% this year, but Zimbabwean officials believe it's necessary to slow inflation, the rate of which is estimated to be above 200%.

Source - Bloomberg - Daily News

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