The Zimbabwean dollar has recently experienced an unceremonious fall as the demand for foreign currency continues to push the currency aside. Gone are the days of the strongest currency in Africa or Southern Africa as the currency seems to have taken to follow its namesake from previous years into oblivion. The interbank market is also moving in the same direction albeit with a bit of a delay. The currency was quoted at 13.7 and 18.5 on the interbank and parallel markets respectively. The parallel market was quoting as high 19 after business hours last night.

The currency has now shed 40% of its value on the parallel market in the last 30 days and 34% in the month of September alone, with 10 days still to go in the month. The currency hasn’t faired much better on the interbank market shedding 28% in the last 30 days and 22% in the month of September.

As the graph above shows the both markets are on an upward trajectory with the parallel market on a steeper increase. This is to be expected as the parallel market continues to be a more open market for both buyers and sellers while the interbank market is friendlier to those intending to sell their currency. After cutting down the difference between the two markets to 9% the parallel market premium has shot up to around 20%though going as high as 35% yesterday.


Many causes have been suggested for the recent movement. Civil service salary increments were cited in the initial push at the beginning of the month. Tobacco farmers seeking foreign currency at the end of the selling season were mooted as a mother cause by Reserve Bank of Zimbabwe Deputy Governor Kupukile Mlambo while speaking before the Parliamentary Portfolio Committee on Public Finance. The usual murmurings of a big buyer (or two) on the market have also been heard. It is likely to be a combination of all the above that is leading to the rapid depreciation of the Zimbabwean Dollar.

Reserve Bank concedes defeat to Parallel Market

On the same occasion Mlambo spoke on the inability of the Reserve Bank to reign in the parallel market. Mlambo made it clear that the parallel market exists because of shortages in the system.
“The existence of a parallel market is a reflection of a shortages in the system or the wrong incentives in the system. Clearly we have to fix that and deal with that (black) market and the best way to deal with that is to make sure the interbank rate is sufficiently priced and there is always sufficient foreign currency,”

The recent developments will come as a double blow to government arms. Firstly to the Reserve Bank of Zimbabwe who’s head John Mangudya had celebrated the seeming convergence of the two rates. The trendlines in the graph clearly show the rates are moving apart. With the currency having a great effect on pricing of goods Finance Minister Mthuli Ncube will also be left in a quandary as his measures continue to fail on the most important stage.