Over the last couple of days, the Zimbabwean dollar has drastically depreciated against the US dollar on parallel markets which has left many people scrambling for a reason to explain the rapid decline. As speculation grew messages started spreading via social media that there were plans afoot to liberalism the interbank market and as such demand for.the dollar had risen in anticipation of more competitive prices on both markets. The RBZ stepped in late yesterday to deny these rumours, categorically stating there is no plan of the sort.

As the graph shows both cash and electronic transfer rates have pushed up sharply this week while the interbank rate remained at its “managed” pace. As always people looked for a reason and some of the theories brought forward were quite interesting. In reality, the changes experienced are due to one factor, the money supply. Unfortunately, money supply figures will only be released later down the line if at all. However, looking back it has always been the money supply growth that fuels the depreciation of the Zimbabwean dollar by whatever name.

Rumours circulate

An answer did appear for those who wondered further though, a message that circulated on social media platforms yesterday claimed the Reserve Bank had thrown in the towel and decided to allow the exchange rate to freely float. It spread like wildfire and excited the imagination of many. The message indicated that people should expect rates to go up to between 30 and 35 against the US dollar. The message then sincerely advised those with available Zimbabwean dollars to purchase US dollars as soon as possible.

Our government has pulled some fast ones on us, quite a few honestly. And it would be foolish to dismiss this easily, stranger things have happened. We’ve seen big buyer theories, Sakunda & other companies, China Nanchang and various fantastic stories in the past explaining the rate hikes of before. Looking back the story always reveals that money supply growth is always at the heart of it. Some would go as far as to suggest that these big buyers and captains of corruption serve as distractions to what is really going on.

RBZ denies

The RBZ took the matter seriously and decided to publish messages on platforms available to them to the effect that the rumours were false. In fact, the matter was deemed so important they took to updating their twitter account which had been dormant since January 24, almost 3 weeks to the day. You can read the notice below.

If the rumour is true, the development will be announced today. Not surprising as the previous world-shaking announcements were delivered on Fridays as well. Liberating the interbank market would have little effect on reality. Reality being the parallel market which the majority use already. The banks and Bureau de Change would simply need more money to offer higher rates, banks admittedly have a lot of that. The parallel market has led the way since 2016 and the interbank market remain market takers.