Zimbabwe dollar down 73% this year; second worst performing currency after Lebanese pound

Zimbabwe dollar down 73% this year; second worst performing currency after Lebanese pound

By Bloomberg News

Zimbabwe’s currency plunged to yet another record low as citizens rushed to the safety of the US dollar amid speculation an announcement from the central bank on the fate of the local unit is imminent.

The Zimbabwe dollar traded at 22,476 against the greenback, taking its losses this year to 73%, the world’s second-worst performance only after the Lebanese pound. A sense of urgency has gripped the nation after authorities brought forward the start date of the new governor, John Mushayavanhu, by a month. The local media reported the move was made to announce a new currency plan that may include embracing the gold standard.

The southern African nation’s unstable currency risks sending the nation back into hyperinflation 15 years after its old local dollar had to be abandoned. The latest two Reserve Bank of Zimbabwe governors, John Mangudya and Gideon Gono, failed to bring order to the exchange rate despite multiple efforts.

These included the launch of gold coins and gold-backed digital tokens under Mangudya’s watch, while Gono repeatedly slashed zeros off banknotes as hyper-inflation spiralled and topped 231 million percent in 2008.

“What we are seeing is anxiety and people preferring to hold US dollars,” said Lloyd Mlotshwa, head of research at IH Securities, a Harare based brokerage. “This signals reverting to a place of safety ahead of the currency announcement.”

Local media reports at the weekend said Mushayavanhu, who assumed office on March 28 instead of May 1 as planned, may announce at the end of this week the new currency policy in a monetary policy statement, which has been delayed for almost two months.

The central bank has not given a date on the release of the monetary-policy statement that was originally scheduled for February but had been deferred to give policymakers time to finetune the currency plan.

David Mnangagwa, the country’s deputy finance minister, said last week the statement’s release was imminent, attributing volatility in the exchange rate to “anxiety and anticipation” over the policy’s delay.

Meanwhile, the premium for dollars in the parallel market over official rates has widened 60% to as much Z$36,000, according to ZimPriceCheck.com which monitors the exchange rates.