Exchange rate on black market tumbles

By Tichaona Sibanda
5 May 2008

The exchange rate of the local currency has taken a knock on the thriving black market, after the Reserve Bank decided to float the local currency on foreign exchange markets.

This was an attempt by the central bank to eliminate speculation on the black market. But the prices of basic goods available in shops have not dropped because they are pegged in foreign currency.

Our Harare correspondent Simon Muchemwa said the decision last week to float the local currency on foreign exchange markets will only benefit the upper classes and not the poor.

The official exchange rate has been kept at Z$30,000 for one US dollar since September 2007 -- but on the thriving black market, one US dollar can be exchanged for around Z$150 million. Before last week, one British pound was being exchanged for about Z$400 million, but has dropped in value since the RBZ opted to ‘liberalise’ its foreign exchange trading system.

Muchemwa said the new monetary reforms would, in theory, improve the availability of foreign currency to the government coffers, but not to the ordinary Zimbabweans.

‘To an ordinary Zimbabwean this means nothing. The prices will not go down because for that to happen you need to flood the market with commodities. The agricultural sector is not producing anything, so most of the foreign currency will go towards importing goods to the country,’ Muchemwa said.

The country has long been experiencing a shortage of foreign currency, which saw the regime failing to import adequate vital commodities such as fuel, electricity, food and medicines. Traditional top foreign currency earners such as tobacco and tourism have nosedived in recent years due to failure of the country's land reform programme and the political crisis. But more than anything, the country is suffering from chronic economic mismanagement.