Zimbabwe central bank sees official black market exchange rates converging in 3 months

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Zimbabwe’s central bank governor said on Tuesday he expected the official exchange rate of a new currency to converge with that on the black market within three months, a move that could help increase the flow of dollars into the banking sector.

The country in February ditched its discredited 1:1 official peg to the U.S. dollar, and merged bond notes and electronic dollars into a transitional currency called the RTGS dollar.

The value of that currency was on Tuesday trading at 3.3 against the U.S. dollar and at 5 to the dollar on the black market.

The mismatch has seen companies and individuals holding dollars selling their money on the black market for higher premiums. Bankers and economists accuse the central bank of manipulating the official exchange rate, charges that central bank chief John Mangudya denied.

“I think within three months we will have a convergence of these rates of parallel market and interbank market rate,” Mangudya said during the launch of an economic report by a private sector company in Harare.

Zimbabwe’s economy has been crippled by a cash crunch that has caused shortages of fuel, food and medicine.

Mangudya, who was last week given another five-year term at the helm of the central bank, said the central bank would soon stop drip-feeding the market with some dollars to allow “willing seller, willing buyer” transactions.

The dollar shortages have seen some businesses charging prices in U.S. dollars while prices in RTGS dollars have soared, pushing up year-on-year inflation to a 10-year high of 66.8 percent in March.

The central bank chief, however, said he expected inflation pressures to ease from the last quarter of this year through 2020, citing a slowdown in month-on-month inflation.

But economists say inflation levels will remain elevated due to a devastating drought that hit crops this year and pressure on the exchange rate due to expected food imports. (Reporting by Macdonald Dzirutwe, Editing by William Maclean)

More: reuters

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About Us

We are a team of independent analysts whose primary focus is research into the Zimbabwean parallel markets as well as the stock market. We strive to bring you the most accurate rates in the market and our independence means we have no bias on these rates. You need to make your business decisions and we strive to be your best source of information.

Disclaimer

As Market Watch we do not deal in the parallel market nor do we quote on behalf of any other person or company. We are not traders and cannot be accountable for any decisions you make around our data. We are researchers only so please do not assume our information is accurate. Our information comes from various sources including social media as well as market informants on the street. For official USD and RTGS rates please consult your banking partner or the Reserve bank of Zimbabwe. Please note it is illegal to deal on the parallel market and we strongly advise against it. Our platform documents the rumoured parallel market that is mentioned on social media and various other sources.

The Lingo

OMIR

The ‘Old Mutual Implied Rate’ is a comparison between the Old Mutual share price on the London stock exchange / the Johannesburg stock exchange and the Zimbabwe stock exchange. Effectively RTGS is valued at 1:1 with the USD, but this difference in share price gives us the implied countries exchange rate.

RTGS

Real-time gross settlement systems (RTGS) is a funds transfer system where money transfer takes place from one bank to another on a “real time” basis and “gross” basis. Settlement in the “real time” means that the transaction happens almost immediately.

BOND

The Zimbabwe Bond Note is a surrogate currency issued by the Reserve Bank of Zimbabwe. This was originally issued against a loan facility from the African Export-Import Bank. The Bond Note is officially 1:1 however the market seems to have significantly discounted the value of the Bond Note.

ZAR

The symbol ZAR is the currency abbreviation for the South African rand.