THE government is likely to raise wages again for its workers in the short-term following the continued depreciation of the Zimbabwe dollar, local research firm IH Securities has said.
The last salary hike for the civil service was in March.
“Mounting ZWL depreciation and inflation have significantly reduced purchasing power, a scenario that is likely going to increase pressure on the government to review salaries again,” IH Securities said.
“The official rate on the auction devalued by 10 percent to the dollar whilst the interbank rate weakened by 13 percent during April. The parallel market rate moved at a faster rate of 34 percent within the same month. As a result, the black-market premium increased to circa 101 percent.”
They are of the view that the current wave of exchange rate volatility in Zimbabwe will likely derail the country’s inflation targeting, even for the blended measure, which mostly tracks price movements in US dollars. Due to the depreciation of the local currency, civil servants have been demanding US dollar salaries.
Meanwhile, the central bank recently introduced gold-backed digital tokens, which will be fully backed by physical gold held by the bank. The digital tokens are to complement the issuance of physical gold coins, which have been in circulation since July 2022.
IH Securities said that while the attraction for gold coins was the arbitrage presented when buying in local currency, the same can be said for the digital gold-backed coins, which provide an incentive for players to willingly surrender their excess RTGS.
“In our view, there is however likely going to be a confidence issue with the digital gold coin lowering uptake of the product and hampering the intended effectiveness of neutralising excess liquidity. In this regard, pressure on the ZWL in the short term is expected to sustain,” the local firm said.
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