Can authorities rebuild trust in the Zimdollar?

THE Zimbabwe dollar, a currency that has been clumsily managed that the public simply abandoned it to save themselves pain and maintain value of their goods and services.

ey have been there before, just over a decade ago when hyperinflation ravaged the local currency to a point where it became pointless.

Are we heading that way again, was the question many asked when the government hurriedly just over a year ago.

What followed was predictable: the local currency rapidly lost value, sending prices rocketing and raising fears of renewed hyperinflation.

By July this year, inflation reached a post-dollarisation high of 837,53%, not quite the 500 billion% of December 2008 but still enough to make the nervous public seek escape in the US dollar again.

Inflation fell to 659,4% last month and the International Monetary Fund (IMF) says it expects the rate to close the year at 495%, still the highest in the world but it reads better than 837,5%.

It is beyond dispute that Zimbabwe needs its own currency However, the problem is nobody trusts the Reserve Bank of Zimbabwe and government to manage it.

Since ending dollarisation last year, the government has flirted with a managed float exchange rate, before fixing the exchange rate. It has since reintroduced the foreign exchange auction market again.

Something feels different about the Zimbabwe dollar this time. After sliding for the first 10 weeks of the auction, the Zimdollar has pulled back in the last six weeks, giving a semblance of stability that authorities have been keen to point as a sign of stability.

But the question of stability is part of key economic discourse and cannot be answered definitively just yet.

is is because the supply of foreign currency is not stable, with exporters only meeting 60% of demand.

Zimbabweans are also having to navigate different exchange rates depending on the mode of payment.

1. USD Cash;

2. USD Nostro;

3. USD Domestic Nostro;

4. ZWL Cash;

5. ZWL Ecocash; and

6. ZWL Bank Account.

Even local banks treat the first two differently to number three.  is selective approach implies that locally generated US dollars are not the same as the US dollars earned from exports.

e auction market is also not yet fully transparent, and the identities of the beneficiaries are being kept a secret.

On Monday this week, the central bank’s monetary policy committee (MPC) kept interest rates steady, arguing that the forex currency auction market had managed to steady prices.

It’s a long way from the disaster that unfolded when the Zimbabwe dollar was reintroduced in February 2019.

How long the veneer of stability will remain, only time will tell because government and monetary authorities have been their own worst enemies and have often led the way in undermining the local currency.