Currency News: Zimbabwe dollar plunged 40% at the beginning of 2024
On the parallel market, Zimbabwe's dollar plunged more than 40% as demand for foreign exchange continues to outpace supply in the new year.
A range of factors, including the end of tobacco sales and a softening of global commodity prices, have affected US dollar inflows into the southern African nation, causing its exchange rate to spiral, said Persistence Gwanyanya, a member of the central bank’s monetary policy committee. Mining accounts for 85% of the nation's foreign exchange.
“Even this quarter, our situation won't be normal,” he said. “We need to manage the demand side, that is, deal with the demand for forex and judiciously allocate resources.”
Zimbabwe has struggled to stabilize its currency since it returned to circulation in 2019. As a result, citizens prefer the US dollar for everything from food to medicine over its local counterpart. In June, the Treasury intervened to stabilize the volatile exchange rate, including requiring companies to pay their taxes in local currency.
Consumer prices rose 26.5% from a year earlier in December, accelerating for the second consecutive month due to exchange-rate volatility.
According to ZimPriceCheck.com, which monitors official and unofficial exchange rates, the local unit changed hands on Monday for Z$10 900 per US dollar, significantly weaker than the official exchange rate of Z$6 467.
In December, the central bank's auction, which provides companies with US dollars, closed for the holidays.
The recent depreciation has disturbed the "equilibrium" since the gap between official and unofficial markets has exceeded the 10%-20% range set by the authorities.
