Zim Dollar Should Trade At 1:5.6 With The USD- Mthuli Ncube

The Minister of Finance and Economic Development, Mthuli Ncube has distributed a note about the exchange rate between the Zim Dollar and the USD. This is on the backdrop of a massive devaluation of the local currency on the official and parallel markets respectively.

On Friday morning the USD:ZW$ rate on the interbank market was 1:14.43 and on the parallel market it was 1:20.5. The rates changed and the local currency regained some value slightly by the end of the day after news broke out that the central bank had frozen accounts operated by some big businesses believed to be fueling currency speculation.

Here is the full text and diagrams from Muthuli Ncube:

This note aims at providing founded quantitative estimates of an appropriate exchange rate between the Zimbabwe Dollar and the US Dollar.

There are several limitations, both conceptual and concerning the availability of data, when trying to establish the appropriate exchange rate for Zimbabwe.

It quantifies the ZWL$/US$ exchange rate based on the real exchange rate with South Africa, deriving the nominal exchange rate rate that would keep real purchasing power of the currencies at 2011 levels, a year of relative macroeconomic balance.

For August 2019, the most recent period for which the necessary data is available, this suggests a nominal exchange rate of about ZWL$5.6 per US$.

This is substantially lower than the average Interbank rate in August (ZWL$10.0 per US$), as well as the average prevailing parallel market rate (around ZWL$11.2 per US$).

By this benchmark, the currency was therefore, on the interbank market, undervalued by 26% on average since February 2019, peaking at 52% in July. On the parallel market (not depicted), the average undervaluation was of 50% since February, peaking at 61% in June.

Minister of Finance and Economic Development 20 September 2019

The irnony of all this is that the president once declared that local currency was grossly over valued.

Anyway, if you want to keep track of what’s going on with the rate on the different markets you can simply message the word ‘Rate’ to our Techzim Market bot on WhatsApp: 0719696102

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