THE Zimbabwe dollar officially lost nearly 60% of its value since the start of the year amid warnings that the current year could be a difficult one for both business and consumers, a new report done by IH Securities has shown.
BERNARD MPOFU
Official figures show that the local currency continued to depreciate in both the official channels and the parallel market. On average in February, the interbank rate moved by 1.94% in nominal terms daily whilst the parallel market trailed behind at 1%.
This resulted in the black market premium being reduced from 63% at the beginning of the month down to 22% by the end of February.
“Year to date, the interbank rate has depreciated 58.48% whilst the parallel market rate has depreciated 39.56%,” IH Securities says.
“The 2024 operating environment will likely continue to be a rough terrain for businesses. Depressed activity in primary sectors as well as increasing cost of living will, in our view, contribute to dampened bottom-of-the-pyramid liquidity leading to slower growth of toplines. Margins will come under pressure in the year due to bubbling inflationary pressures. Exchange rate volatility will remain the key driver of inflation and monetary instability, particularly in the formal sector, posing downside risk to local currency-denominated assets like ZSE [Zimbabwe Stock Exchange] equities and locally priced goods and services. Investor focus is likely to remain currency hedge-driven and we similarly lean towards dollarised assets and/or companies with dollarised earnings.”
Economic growth for 2024, IH Securities says, is expected to slow down from 5.5% in 2023 to 3.5% in 2024 on account of the impact of the El-Niño phenomenon on the all-important agricultural sector as well as a forecast decline in hard commodity prices.
Inflation figures recently released by the country’s statistics agency show that month-on-month blended inflation decrease from 5.4% to 6.6%. The food and non-alcoholic beverages category saw the greatest change at +9.8% month-on-month, whilst communication posted an 8.4% increase within the month.
On an annual basis, the food and non-alcoholic beverages basket cost however grew 84% whilst housing and utilities grew 60% which resulted in February annual inflation registering at 47.6%, up from the January figure of 34.8%.
The government has set an inflation target of just above 10% by year-end, but experts warn that without strong economic fundamentals this may be unachievable.
