Government Addresses the Zimbabwean Dollar’s Volatility

The Government of the Republic of Zimbabwe is working on taming the volatility that the Zimbabwean dollar is presently undergoing.

It will reportedly not hold back on implementing fiscal and monetary measures to resolve the currency issue and simultaneously contain the resurgent inflation.

We want to aid our followers holding Zimbabwean dollar units in staying updated regarding the latest developments about the foreign currency. We think sharing this forex news with them is helpful.

Based on the report posted online by Zimbabwean newspaper The Sunday Mail, Zimbabwe’s Finance and Economic Development Minister, Professor Mthuli Ncube, recently spoke about his country’s economy.

He remarked that the Government of the Republic of Zimbabwe recently unveiled a package of measures comprising rooting out market indiscipline, putting a lid on money supply growth, and militating against the imported inflation’s impact as the Russia-Ukraine armed conflict’s outcome.

Besides the rising inflationary pressures owing to supply chain disruptions the conflict in Eastern Europe has caused, Zimbabwe’s economy has remained buffered by the Zimbabwean dollar’s irregularity.

Ncube cited that the Government of the Republic of Zimbabwe announced several interventions last month to address the Southeast African country’s currency volatility.

The measures entailed a temporary prohibition on direct payments for imported goods from source markets, bank lending, and tighter trading conditions on the stock market.

The Government of the Republic of Zimbabwe also introduced a 4-percent tax on intermediated money transfers conducted in US dollars. It would not abandon the current dual-currency regime.

Zimbabwe’s authorities believe US dollarizing would effectively wipe out the Zimbabwean banking system, pension funds, and company balance sheets. Meanwhile, strictly using the Zimbabwean dollar only would also present problems.

Among these challenges are putting Zimbabwe under pressure with the limited forex reserves position and the need for banks to convert all US-dollar reserves exporters hold to Zimbabwe dollars.

Additionally, the budget deficit would be limited to less than 1.5 percent of gross domestic product or GDP to ensure the Government of the Republic of Zimbabwe lives within its means.

Payments to different contractors involved in the numerous infrastructure development projects in the Southeast African country are currently being staggered to prevent possible effects on the Zimbabwean dollar.

Ncube relayed that they are spreading out payments to contractors. In this manner, they can minimize this liquidity’s impact on the foreign exchange rate.

Nonetheless, the government official remarked that they had also decided to split the payments to contractors. Therefore, 50 percent is hard currency, and the other 50 percent is the domestic currency.

The Government of the Republic of Zimbabwe affirmed that more interventions are in the offing to guarantee monetary policy is effective in dealing with foreign exchange rate volatility.

The latter is also affecting basic commodities’ prices. At the time of writing this report, US$1 is equivalent to 361.90 Zimbabwean dollars, per foreign exchange website Xe.com.

We think the Government of the Republic of Zimbabwe’s focus on the Zimbabwean dollar and its volatility is a favorable step.

We gathered that yearly inflation in Zimbabwe stands at 131.7 percent in May from 94.6 percent one month earlier.

We believe the Government of the Republic of Zimbabwe is working toward the benefit of its citizens.

We hope the current issues surrounding the Zimbabwean dollar will get resolved sooner to help the people amid the high inflationary times.

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