Zimbabwe’s legal tender has breached another significant threshold, declining below 20,000 against the US dollar after its decline past the 10,000 level in late January.
This is according to data compiled by Bloomberg.
On Friday, the currency traded at 20,389 per greenback, reflecting cumulative losses of 70% since the start of the year, making it one of the world’s worst-performing currencies.
The country’s legal tender’s continuous slide has not drawn a swift response from authorities, other than saying they are working on creating a “structured currency.”
The country’s finance minister, Mthuli Ncube said such a structure may be backed by gold, however, the Reserve Bank of Zimbabwe has delayed the release of its monetary policy statement, while the currency plans are being drafted.
The chief investment officer and partner at Running Point Capital Advisors, Michael Ashley Schulman, said the postponement has caused anxiety locally, but most outside investors have already abandoned Zimbabwe’s currency.
Schulman added that the major concern for people in the country is that if Zimbabwe does switch to a gold backed currency, the government will do it at an exchange rate favourable to the new currency and unfavorable to citizens, thus leading to a further last-minute devaluation.
He also added that having a gold backed currency will not necessarily stop future devaluations from occurring, adding that the government can still print money and change its currency ratios.
The Zimbabwean legal tender has remained unstable despite measures made by the government to stabilise the currency, such as requiring corporations to pay all of their taxes in the local currency and hiking interest rates to the highest levels in the world.
In 2023, the American greenback again surpassed the Zimbabwean dollar as the most-used currency in the southern African nation amid surging inflation.
The Southern African country is still scarred by memories of hyperinflation under longtime leader Robert Mugabe.
