Zimbabwe Central Bank Head Hints at More Weakening of New Currency

Zimbabwe’s central bank governor on Monday said the exchange rate for the new transitional currency is unlikely to remain at 2.5 per U.S. dollar by the time tobacco auctions open next week, suggesting the local unit will be devalued further.

The southern African nation faces a dearth of dollars that has caused shortages of fuel, drugs and food and hobbled an economy yet to recover from the disastrous rule of Robert Mugabe, who was removed in a coup in 2017.

The Reserve Bank scrapped its discredited 1:1 dollar peg for surrogate bond notes and electronic dollars last month, merging them into a lower-value transitional currency called the RTGS dollar, which has been stuck at a rate of 2.5 to the greenback.

Many companies have, however, continued to hold onto their dollars waiting for the RTGS rate to weaken further, while most individuals sell their greenbacks on the black market, where US$1 bought 3.8 RTGS dollars on Monday.