The Reserve Bank of Zimbabwe came out swinging the last few months with some measures aimed at controlling the runaway exchange rate. As the Zimbabwean dollar abruptly shed value falling to 23 with US dollar. While some major measures were taken and publicised such as the freezing of Sakunda & Croco motors accounts and the move to ban cash in &out transactions in electronic money platforms little has changed as the depreciation of the Zimbabwean dollar continued as if not much had happened.
While in the short term the RBZ had managed to arrest the rapid decline of the currency the long term certainly told a different. One that is consistent with the words of Deputy Reserve Bank of Zimbabwe governor Jesimen Chipika as she stated that the structural problems in the Zimbabwean monetary space were long term and as long as they went unchanged we would continue to get much of the same. She said these words while explaining why a return to dollarisation is not the panacea to our troubles.
In the month of August the rate increased by 14%on both markets. For the month of September the parallel market rate pushed up by 35% while the interbank rate lagged at 29%. Also of note is the difference between the two market rates (yellow line) which has started to grow again. It would seem that for now the interbank market players are content to watch rather than compete with the parallel market. As of Friday the premium paid by the parallel stood at 33% and this is the point at which we saw a reaction from the interbank market in the previous month.
While the RBZ moved to outlaw the pricing and transacting in any currency other than the Zimbabwean dollar it would seem that demand for foreign currency is still very high in the country. Foreign currencies still provide the best store of value and are unofficially still very much use as the pricing units in Zimbabwe. While the rules of the interbank market allow people to openly purchase foreign currencies from licensed bureau de changes and banks in practice it is not as smooth.
As we head to the end of October we may be braced for another scramble for the scarce foreign currency in the country. Depreciation of the local currency has only accelerated since the introduction of the latest round of measures. Furthermore being in the final quarter of the year with government confirming that civil servants will receive bonuses we are likely to see another push upward for the exchange rate.