Rédaction Africa Links 24 with Zimeye
Published on 2024-03-22 17:12:00
The Zimbabwean dollar has faced a significant decline of over 70% against the United States dollar in a span of less than two months. This decline began when the Zim dollar fell below the 10,000 level in late January, dropping below 20,000 against the US dollar, as reported by Bloomberg.
As of Friday, March 22, the Zimbabwean dollar was trading at 20,389 per greenback, indicating a cumulative decline of 70% since the start of the year. This places the Zimbabwean dollar among the world’s currencies with the poorest performance in recent times.
Despite the alarming decline in the local currency’s value, there has not been a strong reaction from fiscal or monetary authorities, other than their acknowledgment that they are actively working on developing a “structured currency”. The exact nature of this structured currency remains uncertain, with speculation suggesting that it could be backed by gold.
The Reserve Bank of Zimbabwe (RBZ) has postponed the release of its monetary policy statement while the currency plans are being formulated. This delay has caused anxiety locally, although most external investors have already abandoned Zimbabwe’s currency.
Michael Ashley Schulman, chief investment officer and partner at Running Point Capital Advisors, expressed concerns about the potential adoption of a gold-backed currency by Zimbabwe. He highlighted the fear among citizens that a switch to a gold-backed currency might result in an exchange rate that is favorable to the new currency but unfavorable to them, leading to further last-minute devaluation. Schulman advised individuals holding Zimbabwean dollars to spend them quickly on tangible assets.
However, Schulman also pointed out that having a gold-backed currency does not guarantee immunity from future devaluations. He explained that the government could still resort to printing money and adjusting currency ratios, which could lead to further devaluations down the line.
As the situation with the Zimbabwean dollar continues to evolve, it is essential for citizens and investors to stay informed and make informed decisions regarding their finances and assets. The uncertainty surrounding the currency and the potential shift to a gold-backed system highlight the importance of financial planning and risk management in the current economic environment.
Overall, the decline of the Zimbabwean dollar against the US dollar underscores the economic challenges facing the country and the need for prudent monetary policies and strategies to stabilize the currency and restore confidence in the financial system.
Read the original article on The Zimbabwe Eye
