On Zimbabwe’s underground market, the Zimbabwean dollar is collapsing against the United States dollar as confidence in the local currency plummets.
As a last option, traders in Zimbabwe are fixing outdated US dollar notes for desperate clients.
The South African nation will not be receiving any additional US dollar money in the near future. Consequently, dealers buy the torn notes and gain money on the illicit market. ”
“I don’t care if it’s ripped. Serial numbers are all I want to see. They should be visible from all sides. The only way I can survive is to eat rotten food, even if it has been gnawed by rats “Albert Marombe, a currency broker, remarked.
Many shops will not accept it, although market vendors will typically accept it after some haggling.
“When we purchase something here, they don’t have enough change for US dollars, and that’s a problem that we’re having. There are just two options: either we’re compelled to buy these coupons, or we acquire something that can make up for it “Chirume is innocent, a customer stated.
Because of deindustrialization, poor investment, low exports and high debt, Zimbabwe’s economy is in a precarious position. According to a Harare-based economist, the country is now unable to produce enough new dollar notes to support its heavily dollarized domestic economy. Robertson Economics is a consultancy business that John Robertson owns.
Many individuals use the $1 bills to buy their daily bread and other minor things, such as toilet paper. Since the country’s hyperinflation rose to more than 5 billion percent, according to Forex brokers in Zimbabwe the US dollar has dominated in purchases and investments in Zimbabwe. In 2009, the government was compelled to abolish the local currency. On January 1, 2019, the Zimbabwean government reestablished the Zimbabwean currency and outlawed the use of foreign money for domestic transactions. The underground market flourished, while the local currency rapidly depreciated as a result of the economic crisis.
As of March of this year, the dollar prohibition was lifted by the federal government. Foreign exchange trading is unlawful, according to government officials, and the police have raided currency dealers in the past, confiscating their valuable dollar bills and imposing penalties on them.
Crisis in the Country
Since the government returned to utilizing the Zimbabwean dollar (ZW$) as its official currency in 2019, the Zimbabwean central bank has introduced a 50-dollar note. After reaching 800 percent in 2020, the hyperinflation rate has dropped to 106% this year. There are worries that the issuance of this new note could spark a fresh round of hyperinflation, similar to what we saw in 2008.
Others say the Reserve Bank of Zimbabwe is pushing up foreign currency values against the Zimdollar in order to finance essential imports such as food and petrol.
We believe that the Reserve Bank of Zimbabwe is buying dollars, according to an unnamed dealer who spoke to Al Jazeera on the condition of anonymity. A few corporations, including the Reserve Bank, are the only ones who have actual money.
Forex black market participation has been rejected by the central bank.
Inflation will continue to rise, prices will remain stable, and Zimbabwe’s economic prospects will not improve with the introduction of the ZW$50 note, which is worth $0.60 at the current exchange rate. Economic stability has not been achieved with previous injections of ZW$10 and ZW$20 notes. This is due to policy inconsistencies, notably with regards to the currency.
According to a statement from the Reserve Bank of Zimbabwe (RBZ), “The Bank shall disburse ZW$360 million through normal banking channels, and banks are required to fill their respective accounts maintained at the Reserve Bank and receive the cash by 7 July 2021.”
John Robertson, an economist, predicted that the introduction of the ZW$50 note would have minimal impact on the economy. “In order to purchase anything big, you will need a large amount of money. We’ve made a mistake by going down the wrong path. Our denominations should have been larger.”
As a result of Robertson’s push for policy reforms, the cost of living has increased and inflation has slowed.
Energy, products, and services are all increasing in price.” According to him, “the government must maintain policy coherence.”
Almost all items in Zimbabwe are priced in US dollars, which forces most Zimbabweans to exchange their native money on the black market.
As an economist, Christopher Mugaga believes that the adoption of the new currency will not lead to inflationary pressures in the future.
Cash to total money supply ratios has been established by the Zimbabwean central bank at 10-15%.