No reprieve for Zimdollar

THE Zimdollar is projected to weaken further, while exports become more expensive relative to peers as the US Federal Reserve continues to raise interest rates, making the greenback stronger, a leading research firm has said.

The local currency has been losing value since the beginning of the year, forcing monetary and fiscal authorities to introduce several measures to give it a new lease of life.

However, in its equity strategy paper released last week, Inter Horizon (IH) Securities said the local currency would lose more value in the short to medium term despite the measures put in place by the government.

“We continue to see a correlation between parallel market exchange rate and money supply. Treasury has managed to maintain some fiscal discipline, and this has resulted in exchange rates stabilising, to some extent, in the second half of the year,” the report read in part.

“Month-on-month inflation is also moving in tandem with the percentage change in money supply. Zimbabwe continues using a dual currency system with authorities working towards abandoning the US$ (United States dollar) once the ZWL (Zimdollar) has strengthened.”

It added: “However, in the short to medium term, we anticipate continued use of the US$, if not full re-dollarisation, as the local currency has significantly depreciated YTD (year-to-date).

“With the US Fed still increasing interest rates, we expect the US$ to strengthen making our local currency even weaker and our exports expensive relative to peers, negatively impacting our current account balance.”

Currently, the US Fed rate is 5,5%.-newsday