The Confederation of Zimbabwe Industries (CZI) expects the parallel market exchange rate to stabilise by the end of this month if the raft of measures are effectively put into place.
The current macro-economic environment is negatively impacting business growth potential.
Authorities have been instituting a number of measures, including policy changes, aimed at stabilising prices, the exchange rate and taming inflation.
“It will take some time for the impact of the measures to trickle down the whole economy,” CZI stated in its May 2023 Inflation and Currency Developments Update.
“If the measures are properly implemented, the parallel market exchange rate is expected to start showing stabilising momentum towards the end of June 2023. Once stability is achieved, the blended inflation rate would be expected to mask the full impact on the ZWL$ inflation.”
The parallel rate spiralled out of control in May 2023; it increased from USD1: ZWL$2000 at the end of April 2023 to USD1: ZWL$4500 by end of May 2023, according to CZI.
CZI noted that ZWL$ price movements resemble changes in the rate on the black market.
“Pronounced changes in the parallel market rate are felt through massive price hikes. If the exchange rate premium between the parallel market rate and the official market rate is wide, pricing in USD becomes not viable for formal business, as the Financial Intelligence Unit (FIU) forces businesses to use the formal exchange rate even if it is greatly overvalued.
“A wide exchange rate premium, therefore, always drives USD purchases to the informal sector,” it said.
As the United States dollar continues to dominate the market, supermarkets remain at the receiving end as most of their sales are in Zimbabwean dollars, impacting their profits.
The southern African country reintroduced its currency in 2019 after a decade of dollarisation, but the local unit has depreciated sharply against the US dollar due to low confidence – Harare