Zimbabwe’s dollar slumped 26% at an auction on Tuesday, after a report by two separate commissions said it was “overvalued” and urged the government to loosen foreign currency controls.
(Bloomberg) — Zimbabwe’s dollar slumped 26% at an auction on Tuesday, after a report by two separate commissions said it was “overvalued” and urged the government to loosen foreign currency controls.
The local currency now officially trades at 1,888 Zimbabwe dollars to the US dollar from 1,404 a week ago, according to the results of a foreign-exchange auction run every Tuesday by the central bank.
That brings it much closer to the parallel market rate of between 2,300 and 3,000 Zimbabwe dollars to the US currency, as authorities try to close the gap that caused severe price distortions of basic goods and services. A report by two separate commissions released today said the Zimbabwe dollar was overvalued and urged the government to loosen foreign currency controls and allow market forces to determine the exchange rate.
The Competition and Tariff Commission and National Competitiveness Commission said in a joint report on the prices of basic goods and services that the market should set both the exchange rate and prices.
“This measure is unlikely to lead to increases in prices as manufacturers’ prices are pegged in US dollars and indexed to the parallel market,” the two commissions said Tuesday in an emailed report.
The southern African nation has been battling a wave of price hikes on basic good and services. Earlier this month, the cabinet announced that it will set up a separate team to investigate the increases, which retailers have blamed on the depreciation of the local currency. The Zimbabwe dollar has lost more than half of its value this year. The results of the cabinet investigation are yet to be made public.
Read More: Zimbabwe Plans Industry Probe After Surge in Food Prices
The report by the two commissions is at odds with Zimbabwe President Emmerson Mnangagwa, who this week blamed business for the latest economic turmoil. Mnangagwa said on Sunday his government is prepared to take “painful” measures to fix the economy.
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