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Currency Exchange Rate Distortions Cause Havoc in Zimbabwean Street Markets

  • Gibbs Dube

Some sources report currency trades in the Harare black market where the dollar has fetched 10 rand or a rate of 10 US cents per rand - in normal foreign exchange market terms an extraordinary premium for dollars over rand

Fluctuating demand for the US dollar and South African rand in Zimbabwe, where both currencies as well as Botswana's pula circulate as legal tender, has resulted in some price distortions on street dealings in the currencies.

In Johannesburg as elsewhere in the global currency market, the South African rand currently trades around 6.8 rand to the dollar - or putting it another way, one rand equals about 14.5 US cents. That’s about the same exchange rate that consumers and businesses are seeing in Bulawayo, where there is strong demand for the South African rand, and in Matabeleland South province, which runs along the border with South Africa.

But some sources report trades in the Harare black market where the dollar has fetched 10 rand or 10 US cents per rand - in normal foreign exchange market terms a remarkable premium for dollars over rand. The relative attractiveness of the two currencies is influenced not only by intrinsic market value but also by the relative scarcity of physical US dollars, especially small-denomination bills much sought by consumers and traders.

Economists add that such distortions are not easy to control as the Reserve Bank of Zimbabwe has no power to set dollar-rand exchange rates - indeed, the RBZ under Governor Gideon Gono has been close to bankruptcy with its physical assets ranging from buildings to so-called Scotch carts, Zimbabwean wheelbarrows, seized for debts.

Financial analyst James Wade told VOA Studio 7 reporter Gibbs Dube that the longer-term appreciation of the rand against the US dollar on global currency markets has also caused dislocation in Zimbabwe's trade sector, as many merchants and manufacturers source materials in the rand but price their goods locally in dollars.

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