What is the Zimbabwean OMIR rate

What is the OMIR

Zimbabwe’s electronic dollars (Zimbollars) are officially valued at 1:1 to the U.S. dollar but are effectively worth much less. One of the few gauges of the Zimbabwe exchange rate is the so-called ‘Old Mutual Implied Rate’, a comparison of the price of shares of insurer Old Mutual in London and Harare.

During Zimbabwe’s hyperinflation episode (2007-2008), the Reserve Bank of Zimbabwe failed to report any meaningful economic data, including inflation rates.

Prof Steve Hanke and his research team at John Hopkins University then turned to calculating the inflation rate using Purchasing Power Parity (PPP) focusing on Old Mutual share prices.

Old Mutual shares are listed on both the London Stock Exchange and the Zimbabwe Stock Exchange. Each share of Old Mutual commands the same claim on the company’s earnings and assets, irrespective of the market it is traded on. The only difference between Old Mutual shares traded on different exchanges is that the shares traded in London are denominated in British pounds sterling; whereas, those traded in Harare are denominated in Zim Bollars .

Therefore, if price arbitrage works and PPP holds, the ratio of the Old Mutual share price in Harare to that in London equals the Zimbabwe dollar/sterling exchange rate. To convert the resulting Zimbabwe dollar/sterling exchange rate to a Zimbabwe dollar/U.S. dollar rate, Prof Hanke multiplied the Zimbabwe dollar/sterling rate by the sterling/U.S. dollar rate, creating what is known as the Old Mutual Implied Rate (OMIR)

In the absence of or unreliability of alternative/black market rate the OMIR is a more reliable indicator of the prevailing inflation index or "rate riri papi nhasi"