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Zimbabwe economic pressures will linger

Thursday, June 20, 2019

Significance

Since its introduction in February, the local real-time gross settlement (RTGS) dollar, a de facto new local currency, has lost over 60% of its value relative to the US dollar on both the formal interbank market and the parallel market. Meanwhile, drought and the damage wrought by Tropical Cyclone Idai have placed further pressure on scarce foreign currency resources, prompting increased public protests.

Impacts

  • Forex and fuel turmoil will harm the pivotal mining sector, particularly gold, prompting rising job losses and scaling back of operations.
  • Increased tax collection obscures the emergence of an increasingly self-defeating tax revenue system.
  • The Zimbabwe Energy Regulatory Authority's continued control of pricing could see price distortions persisting and renewed fuel shortages.
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