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Zimbabwe's Currency Fix Is Failing: It Has Too Few Dollars

Zimbabwe's Currency Fix Isn't Working: There are Too Few Dollars

(Bloomberg) -- Zimbabwe’s attempt to close a wide gap between its official and black-market exchange rates appears to be failing.

The southern African nation effectively devalued its currency, known as RTGS$, in February when it ended a peg to the U.S. dollar and allowed it to trade on an interbank market. That was to try to end dire shortages of fuel, medicine and other imported goods.

It hasn’t worked out as planned: the black-market rate remains much weaker than the official one amid a lack of dollar supplies from the central bank and foreign investors, who mostly continue to shun the country.

The central bank carried out a second big devaluation on Wednesday of almost 25%, which has taken the official price of the RTGS$ to around 4.76 against the greenback. The parallel rate is 33% weaker at 7.1, according to marketwatch.co.zw, a website run by financial analysts.

Zimbabwe's Currency Fix Is Failing: It Has Too Few Dollars

Government officials announced last weekend that they’d obtained a $500 million loan that would be used to boost liquidity in the interbank market. The relief from that was short-lived, with the parallel rate giving up its initial gains.

The central bank said on May 20 that fuel importers will no longer be able to buy dollars at a one-to-one exchange rate and that they’d have to use the interbank market.

To contact the reporter on this story: Paul Wallace in Lagos at pwallace25@bloomberg.net

To contact the editors responsible for this story: Dana El Baltaji at delbaltaji@bloomberg.net, Hilton Shone, Robert Brand

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