The Zimbabwean dollar on a free fall

The Zimbabwean dollar was floated at the beginning of May 2008 and started trading at 165 million to the US dollar in the interbank market.  As of 12 June 2008, barely six weeks down the line, the Zimbabwean dollar is trading at 3,2 billion  and 527 milion dollars to the US dollar and Swedish Kronor respectively.  Holders of hard currency are encouraged to sell both hard cash and their foreign exchange balances with the banks over the counter. It seems the strategy has been to boost national foreign reserves and pay off internal foreign currency debts that the state has accrued through the Reserve Bank of Zimbabwe. Previously the Reserve Bank had demanded that all foreign currency balances be put under its administration, which money have been redeployed resulting in a situation where funds holders can not access their credit balances on demand. This has inevitably negatively affected the operations of exporters, Non governmental Organisations (NGOs) and holders of free funds. All these categories have since been encouraged to opt for Zimbabwean dollars that can easily be printed hence the free fall of its value. It has basically been a buyers’ market and with demand outstripping supply, the price of foreign currency has sky rocketed. This has pushed inflation to seven digit figures.  Unfortunately the majority of Zimbabwean that do not have access to foreign currency. They continue to bear the brunt of this economic crisis.

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