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Zimbabwe govt appears stumped by latest Zimdollar slide

by Staff reporter
28 Apr 2023 at 07:02hrs | Views
VICE-PRESIDENT Constantino Chiwenga told attendees at the Zimbabwe International Trade Fair (ZITF) International Business Conference this week, essentially, not to worry about the economy.

Specifically, he reassured guests that the skyrocketing prices of goods and services happening in the market reflected the store of value demand for foreign currency.

It almost sounded like he was singing the famous line from the song Three Little Birds by Jamaican reggae legend, the late Bob Marley.

Don't worry about a thing 'Cause every little thing is gonna be alright!

The only problem is Marley's song was a metaphor about not worrying much when times get tough, whereas daily life in Zimbabwe is real and cautionary tale to when things move from bad to worse.

At the heart of this is the massive depreciation of the Zimbabwe dollar.

This can be seen in declining disposable and wage income, shortages of foreign currency, tighter lending, world record interest rates, stagnant productivity, electricity and water challenges, and high unemployment, among other challenges.

And what makes these problems worse is that they are not going anywhere, if anything, they're increasing.

Why are they increasing? Because of speculative tendencies.

Experts have often told the government to no avail that the Zimbabwe dollar needs something to back it to give it some value.

Since its release in June 2019, the currency has lacked enough minerals, market confidence and foreign currency to support it.

Further, instead of liberalising the official forex market, the central bank decided to put controls, so the Zimbabwe dollar's value has never been able to be determined officially.

Resultantly, forex traders started to speculate the value of the Zimbabwe dollar whenever civil servants were getting paid or when the government had to pay its suppliers.

Basically, any other moment the government created money as the fall of the Zimbabwe dollar meant increased spending to cover the loss.

Currently, the Zimbabwe dollar is trading at $1 033,63, against the United States dollar, while on the parallel forex market is trading at $2 100.

So, no, "every little thing, is not going to be alright" because if the local currency continues with its downward spiral the country will be gutted.

For starters, it will affect productivity as it will eventually become more expensive to import raw materials to make the product and the consumer who buys the end product will experience income depreciation.

On top of that, inflation will rise as goods and services will seek to keep up with the Zimbabwe dollar, thus eroding the consumer's purchasing power.

The failing Zimbabwe dollar also means government itself faces higher costs in importing critical commodities, spending money on infrastructure, increasing social spending, and attending to the nation's utilities, among other critical functions.

So, no, everything is not well, and neither is "every little thing is gonna be alright!"

Source - newsday