THE World Bank says confidence in the Zimbabwe dollar has waned after a new government-sanctioned survey revealed that over 70% of transactions are now being conducted in foreign currencies as rural areas also ditch the unstable domestic unit.
Experts say high levels of inflation and excessive money supply growth have over the past year piled pressure on the domestic currency, prompting retailers and service providers to price goods and services in the greenback or the rand.
The authorities reacted to the impeding carnage by raising policy rates and suspending payments to government contractors after accusing them of driving parallel market foreign currency transactions.
Despite adopting a cocktail of measures, latest official figures from the central bank show that nearly two-thirds of domestic expenditure is now in foreign currency.
According to the latest High-Frequency Telephone Survey of Households jointly conducted by the national statistical agency ZimStat, World Bank and Unicef, more than half of Zimbabweans are using foreign currency in conducting daily transactions although the country officially has a dual monetary system which gives legal effect to the Zimbabwe dollar as legal tender.
The survey referred to as the Rapid PICES Monitoring Telephone Survey is based on Poverty, Income, Consumption and Expenditure Surveys (PICES) of 2017 and 2019.
The initial PICES survey in 2017 covered 32 000 households from which a sample of 3 000 households was drawn for the 2019 Mini PICES Survey. From the 2 201 responding households, a sample of 1 800 households that provided contact details was drawn for the Rapid PICES Monitoring Telephone Survey. Eight rounds of the same survey were completed between July 2020 and August 2021, with the sample representative at both urban and rural areas.
The survey shows that round 8 also collected data on prices and currency of transaction for key food items, namely maize-meal, cooking oil, rice, beef, and bread. At national level, more than 78% of the transactions on food purchases were in United States dollars or South African rand, while about 21% occurred in local currency (ZWL). The use of foreign currency was higher in rural areas than in urban areas. The use of USD was the highest for the purchase of beef and maize-meal.
Marjorie Mpundu, World Bank country manager for Zimbabwe, told delegates attending the launch of the survey that the widespread use of foreign currency reflected declining confidence.
“The data shows that people are losing trust in the local currency,” Mpundu said.
“Of the five key food items – maize-meal, cooking oil, beef, rice, and brown or white bread – about 77% of the purchases were done in USD or South African rand. The use of foreign currency is more common in rural than urban areas. Rapid loss of its value means the currency cannot serve as the store of value and medium of exchange.”
The study shows that the most common sources of household income were assistance from a family member within the country and wage employment accounting for 15.9% each. Non-farm family business in round 8 constituted 11.1% of household income compared to 15% in round 7.
“Further, remittances from abroad constituted 6.5% in round 8, compared to 11% in round 7. Assistance from the Government accounted for 3.6% compared to 8% in round 7. Assistance from NGOs constituted 2.0% in round 8, compared to 7% in round 7,” the study shows.
“The Government introduced safety nets on households to mitigate against the impact of the Covid-19 pandemic. At national level, 2% of the households received Covid-19 cash transfers, 3.3% received food/grain and 0.1% received assistance from the public works programme.
The proportion of households in urban areas who received Covid-19 cash transfers was 6.3% compared to 0.3% for rural households. In contrast, share of rural households who received food aid was 4.9%.”
The survey collected data on availability of basic commodities such as maize-meal, cooking oil, rice, beef and bread in both rural and urban areas.
“All basic commodities were readily available in urban areas with at least 95% of respondents confirming availability. In rural areas availability ranged from 52% for beef to 96% for cooking oil.
The commodities that are readily available in rural rural and urban areas were cooking oil, rice and bread,” the survey shows.