THE Zimbabwe dollar was ranked as one of the worst-performing currencies alongside strife-torn Sudan’s pound as the southern African nation battles to mend its floundering economy, a new report by the African Development Bank (AfDB) has revealed.
BERNARD MPOFU
Experts say excessive money supply growth not backed by productivity and the involvement of the central bank in quasi-fiscal operations are to blame for weakening the value of the domestic currency despite its declining usage.
The regional bank says with world interest rates and global uncertainty remaining high, most African currencies continued to weaken against the US dollar in 2022–23.
“The Zimbabwe dollar, the Sudanese pound, and the South Sudanese pound were the worst-performing currencies in 2023, reads part of AfDB report titled Africa’s Mac[1]roeconomic Performance and Outlook.
“Furthermore, all of Africa’s leading commodity- exporting countries experienced sustained exchange rate depreciations as commodity prices retreated from their 2022 peaks, except for Liberia and Guinea (both unchanged) and Algeria (+4.5 percent).
“The Sudanese pound depreciated by almost 78 percent, as the protracted civil conflict in that country curtailed export earnings and depleted foreign currency reserves. The South Sudanese pound lost almost half of its value against the US dollar and is expected to depreciate further because of spillovers from tight US monetary policy and widening balance of payment gap due to the highly-import dependent economic structure of the country.”
The report further shows that the Burundi franc was the worst- performing currency among non- resource-intensive countries, as low foreign exchange reserves, global uncertainty, and 20% inflation pushed the currency down in parallel markets, forcing the central bank to devalue it 39% in May 2023.
With 3.8% appreciation in both Cabo Verde and Comoros, the two islands’ currencies were the top performers, benefiting from a rebound in international tourism. Just recently, an International Monetary Fund (IMF) staff team led by Wojciech Maliszewski noted that the domestic currency dramatically lost 95% of its value since the beginning of December last year.
The IMF team held meetings with Finance minister Mthuli Ncube, his deputy David Mnangagwa, Reserve Bank of Zimbabwe governor John Mangudya, other senior government and Reserve Bank of Zimbabwe (RBZ) officials, the private sector, civil society organisations, and Zimbabwe’s development partners.
The mission’s engagements covered policies to restore macro-economic stability and improve growth prospects, focusing on finalising the transfer of the RBZ’s quasi-fiscal operations to Treasury and addressing other sources of fiscal pressures.
It also covered liberalising the foreign exchange market and establishing an effective framework for exchange rate and monetary policies, and progressing on reforms to improve economic governance. Economic commentators and market watchers say apart from the not-so-pleasing macro-economic indicators, corruption, an unsustainable debt and lack of political will to adopt neo-liberal policies will hamstring Harare’s quest to mend the economy.
