Foreign exchange will be traded freely among banks as
Zimbabwe’s financial authorities upgrade official forex trading by bringing in
an electronic trading platform, allowing a managed float of the Zimbabwe
dollar, introducing measures to mop up excess corporate liquidity, spreading
Government disbursements evenly to prevent bulges in money supply and curbing
black market trading.
Announcing the new raft of measures yesterday as part of
Government efforts to stabilise foreign exchange trading, exchange rates and
inflation, Finance and Economic Development Minister Prof Mthuli Ncube said a
broad-based taskforce will oversee the package of new policy measures designed
to open markets in a phased manner.
He told bankers and journalists that the taskforce will be
spearheaded by his ministry and the Reserve Bank of Zimbabwe (RBZ) and will
include members of the Monetary Policy Committee (MPC) and the Presidential
Advisory Council (PAC).
The planned policy interventions were part of the
de-dollarisation roadmap and come as a result of a recent surge in the black
market exchange rates driven by a bulge in Zimbabwe-dollar holdings by a small
group of corporates and an official foreign exchange trading platform that
needed to be more transparent and effective.
The high liquidity by the small number of corporates, with
200 holding about half of Zimbabwe’s total money supply according to the latest
RBZ report, was interacting with a limited pool of free funds largely fed by
Diaspora transfers, pushing up black market rates.
The programme is designed to prevent the bulges in
holdings, mop up some of the corporate liquidity and ensure the official market
is more responsive and open.
RBZ Governor Dr John Mangudya, said the measures to
stabilise the exchange rate were critical given its pass through effect on
inflation.
Minister Ncube said Government was cognisant of the fact
that unrestrained money supply was one of the fundamental causes of inflation
and depreciation of the exchange rate, as happened prior 2009.
“In order to stabilise the exchange rate and hence to lower
inflation, the Government has decided to implement a holistic package of key
policy measures. In this regard, currency taskforce has been set up,” Minister
Ncube said.
He said Zimbabwe will introduce a managed floating exchange
rate trading system and an electronic forex trading platform, which will allow
foreign exchange to be traded freely among banks to determine a true market
exchange rate.
The minister said the country had no transparent and
effective foreign exchange trading platform, which resulted in official rates
not being effectively determined, giving rise to a thriving black market.
The official exchange rate stood at $18,5 to the US dollar.
Bureaux de Change will also participate on the electronic
platform. The minister said the Bureaux de Change rules were being liberalised
so that they can conduct a wide range of transactions including financing
importers.
On its part, the RBZ will provide liquidity to stabilise
the exchange rate where necessary, which will be accessed at the market
determined interbank exchange rate.
The interbank market has been using the mid-rate to
determine the daily exchange rate since September last year to avoid free-fall
of the domestic currency.
Treasury will maintain cash budgeting, thus severely
limiting growth in local currency money supply, as part of the measures to
stabilise the rate and inflation. It will also smooth expenditure disbursements
so that large payments do not disrupt the forex market. Treasury Bills will be
pre-planned to cover the whole year with approval by the Monetary Policy
Committee.
It is now accepted by many in the markets that some of the
surges in black market rates are driven by those who have received a large
payment and want to lock it into foreign exchange.
The RBZ will mop up excess liquidity held by corporates and
other large holders of Zimbabwe dollars in the banking system by introducing
short-term corporate bills.
Minister Ncube said to ensure success of the policy
measures, Government was implementing certain regulatory changes that will be
effected as a matter of urgency.
“Our laws and enforcement regime are not as effective as
they should be when it comes to crimes relating to foreign exchange and
financial fraud. The current legal and institutional framework relating to
curbing of trading on the parallel market is quite inadequate.
“Government will be reviewing all the laws and
institutional framework in order to bring them in line with international best
practices and more importantly monitor the effectiveness of institutions
charged with implementing the laws,” he said. Herald
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