The parallel market exchange rate has taken a rapid upward spiral since the Reserve Bank of Zimbabwe (RBZ) announced the introduction of the new $ 10 and $ 20 notes as exchange rate fluctuations react to the Increase in circulating cash, established 263Chat Business.
The local currency (ZWL) has fallen nearly 20% against the US dollar (USD) on the parallel market since Thursday last week when the Central Bank announced the issuance of new notes this week.
This morning the parallel market traded the Zimbabwean dollar at ZWL $ 60 for USD on bank transfers and on the public mobile money platform-OneMoney while on the platform Ecocash, it was trading at ZWL $ 58.
There is concern that the trend in the exchange rate will continue in the two weeks leading up to the first week in June, when the $ 20 bills are expected to begin circulating.
The Central Bank, however, stressed that the new notes are not an increase in the money supply but a simple exchange of existing RTGS values for cash.
Nevertheless, the market is skeptical about the motivations of the Bank given its history of dishonesty in terms of money supply.
"What we see on the black market is a situation in which currency movements are mainly influenced by speculative trends rather than by any other factor. The movement has to do with what market movers predict, as more "Printed money means there are enough to buy many dollars, so they also increase the amount of zim-dollars needed to buy dollars," said economist Victor Bhoroma.
On the other hand, the official rate on the interbank foreign exchange market remains stagnant at $ 25 ZWL against the USD.
This has caused massive inefficiencies in interbank operations, warned analysts at the monetary authorities.
Meanwhile, exchange rate fluctuations in the parallel market have resulted in a new wave of rising inflation.
Year-on-year inflation is estimated to now be near the 1,000% mark despite a rather conservative figure of 676% released by the government in March this year.
Authorities say new notes are intended to ease liquidity shortages in the economy and that the Bank is seeking to reach at least the 10-15% threshold of broad money by global standards to maintain the cash balance.
"This is a good step to introduce new notes because currently we are around 5% of the liquidity threshold, so we have to push it to around 10% to liquefy the economy," said Pepukai Chivore, economic analyst.
"The problem, however, lies in the lack of public confidence in the political statements made by the government. The problem concerns confidence because it is lacking in all economic agents," he added.
The RBZ has injected more than ZWL $ 1 billion into the economy since September of last year, but cash flow difficulties persist, giving enterprising money changers the ability to set high cash premiums.