Once again, we had another eventful month in the Zimbabwean monetary space. The Zimbabwe dollar continued its downward trajectory but did better than in September. The new currency was announced only to later be corrected to new notes for the old new currency that was announced. And if you’re still able to keep up the plans were announced to alleviate cash shortages through these new notes and coins. With the new Monetary Policy Committee seemingly driving off the front foot so early on we shall see if indeed more minds are what the Zimbabwean dollar needs.
Overall the parallel market trajectory is still very much upward, for both the cash and electronic rates. It would seem that the move to restrict cash in and cash out has done little to alleviate the cash problems the economy is facing. The committee, of course, has announced the introduction of a further 1 billion in cash over the next 6 months to fix the core problem which is a lack of cash notes and coins. I’ve added the cash rate to the graph as going forward it will be beneficial to see how the markets respond to the Reserve Banks plans. The Interbank market in the meanwhile seems to have run out of steam and is unable (or perhaps unwilling) to chase after the parallel market.
Month on month changes in the exchange rates as depicted in the graph above shows just how much of a rollercoaster the month of September was in both parallel and interbank markets. October, however, has been almost silent at 3% on the interbank market while there has been significant 12% movement on the parallel market consistent with August levels of 17% on the interbank market and 16% on the parallel market. The interbank market’s loss of steam is evident as the parallel market cash rate has done a lot of catching up.
Zimbabweans will largely be grateful for the relatively quiet month that characterised October and hope that it is not the quiet before the storm. The new notes and bond coins to be issued starting in November have triggered fears of inflationary pressure. The Reserve Bank finally admitted that both inflation and exchange rate movement were results of money supply growth and there are genuine fears that the new notes and coins can add to this.