The Zimbabwean dollar took a heavy knock against other currencies during the weekend, a couple of days after the Reserve Bank of Zimbabwe (RBZ) governor, Gideon Gono introduced the new set of higher denomination bearer cheque notes.

Ten Million Dollars

Market sources indicate the local currency which was for a long time not sufficiently available, was now slowly becoming accessible and to a larger extent, this has prompted the other currencies to shoot up. Commodity and service providers have also increased prices and fares on the back of the introduction of more new notes.

"It all started around Friday, last week. On Saturday, the US$ rate was at $4.5 million, and today it is at $5 million."

"It seems the Zimbabwean dollar will continue to lose ground in the near future," he said.

The Zimbabwe dollar's losing ground against major currencies has been cited as a reflection of the rise of real prices of commodities relative to prices of the same goods in US dollars.

Market watchers say due to the cash shortage, there existed a two-tier rate, especially for the US dollar namely; the cash and transfer rates.

"The cash rate was lower and usually prevailed at figures around Z$1.8 million to the US dollar because cash was not available in circulation," said one stockbroker.

"The transfer rate (RTGs) was higher at levels around Z$1 to US$5 million because no cash would be involved in the transactions.

"Now that cash is available in the market, the two-tier rate system has been abolished," he said.

In and around the city of Harare, over the weekend, prices of goods and commodities have increased by more than 100 percent.

A 2 litre bottle of cooking oil which cost $12 500 on Friday, now costs not less than $26 million. A 5kg bag of rice which cost $15 million now fetches for $44 million, among other things.

"If the US dollar shoots up, businesses hike their prices and fares in relation to the US dollar."

"This has been most familiar with fuel, in which most service stations which import the commodity for themselves tend to charge in US dollars," he said.

In October, an exchange rate of US$1 to $840 000 prevailed.

On November 14, 1997, the Zimbabwe dollar lost 71.5 percent of its value against the United States dollar. In local business circles, this day has since been marked, 'Black Friday'.

The stock market subsequently crashed, wiping away 4 percent from the value of shares as investors scrambled out of the Zimbabwe dollar.

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