The market is closely watching today’s foreign currency auction, Zimbabwe’s third, to see if President Emmerson Mnangagwa’s administration has finally got things right on the exchange rate which has been the cause of most of the country’s woes like escalating prices, wage erosion and inflation.
The market was jittery yesterday with most money changers playing it safe as rates tumbled from as high at 105 to the greenback on Friday to as low as 82:1 for bulk buyers, that is those buying US$100 and above.
The official exchange rate was $63.74.
The Zimbabwe Energy Regulatory Authority did not adjust the price of fuel last week though the exchange rate had dropped from $57.36 to $63.74 indicating that it felt that the rate might appreciate thus forcing it to reduce the price of fuel if it increased it as the price is now supposed to follow market trends.
The Grain Millers Association also reduced the price of bread though it emphasized that future prices will be determined by the exchange rate.
The gap between the rates offered at the first auction, $25.50 to $100 also narrowed at the second auction with offers ranging from $37.82 to $92.
The government is under pressure to pay civil servants in United States dollars but this could fall away if the currency stabilises and begins to appreciate.
This will, however, be an uphill struggle as various forces are increasing getting frustrated by the slow but sure progress Mnangagwa’s administration is making because they are aware that once out of the woods, any plans against Zimbabwe will not work.