A currency trader counts money on a street in Harare, Zimbabwe, on Jan. 16, 2024. The cost of goods and services keeps on increasing in Zimbabwe as the local currency depreciates against the U.S. dollar, a trend that accelerated at the beginning of 2024. (Xinhua/Tafara Mugwara)
by Tafara Mugwara
HARARE, Jan. 17 (Xinhua) -- The cost of goods and services keeps on increasing in Zimbabwe as the local currency depreciates against the U.S. dollar, a trend that accelerated at the beginning of 2024.
The local dollar, which officially traded at 6,192 per 1 U.S. dollar on Jan. 2, is trading at 8,746 as of Jan. 17, according to the Reserve Bank of Zimbabwe daily exchange rate updates.
On the black market, where most Zimbabweans buy foreign currency, 1 U.S. dollar can fetch up to 13,000 Zimbabwean dollars.
Economist Prosper Chitambara said the accelerated depreciation of the local currency started after the announcement of the 2024 national budget at the end of last year by Finance Minister Mthuli Ncube.
"I think it was not well received, in particular the raft of tax measures that were announced by the minister, so that kind of eroded confidence in the economy, and we saw the local currency actually being affected in terms of its valuation, and that trend has also continued even into the year," Chitambara told Xinhua.
Zimbabwe National Chamber of Commerce Chief Executive Officer Christopher Mugaga said the depreciation could be attributed to injected liquidity by the government to pay for services and different contractors.
In addition, he said the U.S. dollar has become a haven for investments, thereby creating demand for the greenback.
"Most employees, both from the public and private sectors, whenever they earn their salaries, they tend to make a beeline to secure U.S. dollars as a way of locking value in their currency, and in the process this has been creating a typical artificial exaggerated demand for the greenback, strengthening it against local currency," Mugaga said.
Denford Mutashu, president of the Confederation of Zimbabwe Retailers, said the Zimbabwe dollar has been depreciating against the U.S. dollar on the back of reduced foreign currency inflows into the country.
"Remember the last quarter of the year usually is synonymous with low foreign currency revenue inflows, and the mining sector is one of the major contributors to the foreign currency inflows into the country, but the global commodity prices tumbled, and that sort of slowed down the foreign currency inflows," Mutsu told Xinhua.
Since reintroducing its currency in 2019 after abandoning it in 2009 due to hyperinflation, Zimbabwe has faced challenges in stabilizing the local dollar, leading to the widespread preference for U.S. dollars in settling domestic transactions.
According to the national statistics agency, ZIMSTAT, nearly 80 percent of local transactions in Zimbabwe are conducted in the greenback.
Phillip Mafundu, general secretary of the Progressive Retail and Wholesale Workers Union of Zimbabwe, said low wages, local dollar depreciation, and the disparity between official and unofficial exchange rates have left workers who receive wages in local currency in a dire situation.
"What it means with what has happened right now, that the rates have gone up, it means workers are going home without anything, they can't even pay bills, they can't even pay for transport because everything is now in U.S. dollars, so they are in a difficult situation," he said.
Mafundu said workers' remunerations should reflect realities in the economy.
"We think that the money that is appropriate, or the minimum wage that is appropriate for the retail and wholesale sector at the moment is 450 (U.S.) dollars because of the economic situation that everyone is facing including the business and the workers, which is a little bit closer to the poverty datum line which is around 575 (U.S.) dollars," he said.
Elisha Mangachena, a worker from Harare, the capital of Zimbabwe, said the distortions in the exchange rate are making it impossible to make ends meet. "Our wages are in local currency, but when we try to buy U.S. dollars, we cannot catch up with the exchange rate, and our employers are not increasing wages at the same pace as inflation. In addition, they use the official bank rate while we depend on the black market," he said.
Velma Muchongwe, an informal trader in Harare, said the exchange rate volatility is making business unviable.
"Sometimes you cannot restock because the price keeps on increasing at the wholesale, and you will end up in a loss," she said.
The persisting currency volatility brings back memories of 2008 when Zimbabwe's inflation reached historical levels, rendering the local currency worthless. ■
People walk past a roadside grocery store in Harare, Zimbabwe, on Jan. 16, 2024. The cost of goods and services keeps on increasing in Zimbabwe as the local currency depreciates against the U.S. dollar, a trend that accelerated at the beginning of 2024. (Xinhua/Tafara Mugwara)