Move on Zimbabwe dollar, these other currencies are collapsing

The Zimbabwe dollar is well known for its remarkable collapse that led to the worthless trillion-dollar bill. As I wrote here, the new version of the ZWD has continued plunging in the past few months. However, it seems like other currencies in the emerging and frontier market are collapsing as well.

Kenya shilling

The Kenya shilling (KES) has been in a freefall as the economy has imploded. The USD/KES, which was trading at 58 in 1997 has now surged to 135.75. Banks and other forex bureaus are now selling the USD for over 150. 

This situation happened as the country’s exports dropped and imports jumped. Its national debt jumped to a record high while labor productivity has dropped. With foreign debt maturing at a faster pace, there is a likelihood that the Kenya shilling will continue falling in the coming months. I suspect that it will hit 200 by 2024 as the country’s debt crisis and public sector wages continue. Just this week, county governors threatened to shut down operations because of lack of cash.

Turkish lira

The Turkish lira has also collapsed in the past few decades. The USD/TRY pair is trading at a record high of ~20, 1,589% higher than the lowest point in 2008. Unlike other countries, the Turkish lira collapse has been self-inflicted since the country’s productivity remains high. 

The lira plunged because of the unconventional monetary policies of the CBRT. It has simply slashed interest rates in a period of high inflation. It also lacks the needed trust because of political interference. Therefore, as I wrote here, the Turkish lira can surge if the country elects a new president in May, which is highly unlikely.

Nigeria naira

The collapse of the Nigerian naira has been sad to see. The USD/NGN has jumped by more than 465% from the lowest point in 1998. This collapse happened even as the volume of oil exports remain high. 

The challenge for the Nigerian economy is that it exports crude oil and then imports expensive refined products. Also, the country provides costly fuel subsidies, which have seen it push the budget surplus to historic highs. The incoming government faces an uphill battle to save the Nigerian naira.

Pakistani rupee

The other currency that has become worthless is the Pakistani rupee. The USD/PKR pair has jumped to a high of 275, which is ~600% above the 2008 lows. This situation could worsen soon as the country is set to default on its bonds in June if there is no IMF rescue. As Argentina has showed us, an IMF rescue is usually a short-term measure that boosts the currency temporarily. The Argentina peso has plunged despite several rescue packages by the agency.

Lebanon pound/lira

The collapse of the Lebanese economy is well-known. As I wrote here, the country is going through a major challenge. Its exports have plunged while the country’s banking sector is on the verge. The country has moved to a cash society and analysts believe that the situation will continue to worsen. Therefore, the possibility of the LBP collapse is significantly high.

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