Faced with a weakening currency and speculative pressures, the Zimbabwean government is poised to unveil a cocktail of measures aimed at shoring up the Zimdollar. Finance Minister Professor Mthuli Ncube has hinted at potential reforms to the foreign currency auction system and increased forex injections to tame the recent volatility.
The local currency has been under stress over the past three weeks, succumbing to both speculative activity and aseasonal demand that typically surges at the start of the year. The parallel market exchange rate has tumbled from US$1: $9,800 in late December to a worrying US$1: $13,000, while the official rate has also slid from US$1: $5,903 to US$1: $8,331.
“Currency volatility is being driven by speculative behaviour and a shortage of foreign currency during this high-demand season,” Professor Ncube acknowledged. He outlined a two-pronged approach to address the issue, encompassing both fiscal and monetary policy interventions.
“Government will be taking further measures, which may include auction redesign, to deal with the volatility,” he revealed. Additionally, plans are underway to boost foreign currency supply during this peak demand period.
Balancing fiscal discipline with currency stabilisation remains a key challenge. “Although it might be difficult to stay within the budget given the weakening of commodity prices and climate change, it is important for the Government to be committed to fiscal discipline,” Professor Ncube emphasised.
The Reserve Bank of Zimbabwe’s Monetary Policy Committee is expected to continue playing a crucial role in managing liquidity and maintaining exchange rate stability. Inflation control remains a primary objective, with the central bank targeting a monthly inflation rate of below 3% throughout 2024.
The success of these planned measures will be closely watched, as Zimbabweans grapple with the rising cost of living and seek stability for their currency. Whether the government’s interventions can effectively counter the headwinds remains to be seen, but one thing is clear: decisive action is needed to restore confidence in the Zimdollar and navigate the current economic turbulence.
