Both the official and parallel market exchange rates have
stabilised after recent policy measures which have reduced excess liquidity in
the market and curtailed speculative demand for foreign currency.
Dr Mushayavanhu told The Sunday Mail that, as Government
workers’ bonuses are being paid in both the US dollar and Zimbabwe Gold (ZiG),
with a larger component in hard currency, “the impact on the exchange rate
should be limited”.
“Furthermore, the Government has already budgeted for civil
service bonuses, which are accommodated within Government revenues, implying no
significant impact on exchange rate and prices. Consequently, the Government is
expecting substantial revenue inflows from the fourth quarter quarterly payment
dates (QPDs),” he said.
The festive season, he further said, typically sees
increased economic activity and consumption, with retailers offering discounts
to boost sales.
“In addition, the country experiences an increase in
diaspora remittances as diasporans return home for the holidays. As a result,
the net effect on exchange rate and prices is likely to be minimal,” added Dr
Mushayavanhu.
The central bank believes the tight liquidity conditions
resulting from recent policy measures have successfully reduced excess
liquidity in the market and curbed speculative demand for foreign currency,
which, in turn, has led to a narrowing of the parallel market premium.
“The measures included increasing the bank policy rate from
20 percent to 35 percent, raising statutory reserves to 30 percent and
enhancing the flexibility of the exchange rate on the foreign exchange
interbank market,” he said.
“In addition, the increased flexibility in the
willing-buyer, willing-seller interbank foreign exchange market has led to a
positive response in foreign currency supply. This has measurably contributed
to currency and price stability in the economy. The Reserve Bank’s tight
monetary policy stance will continue to have a positive impact and result in
further narrowing.”
The Liquidity Management Committee (LMC), comprising
representatives from the central bank and Treasury, has been convening
regularly. The committee’s primary objective is to coordinate liquidity
management within the economy, thereby mitigating any emerging liquidity and
exchange rate risks that could potentially compromise price stability.
“To complement the LMC, the RBZ has re-established the Open
Market Operations Committee, which also meets regularly to manage liquidity in
the economy,” Dr Mushayavanhu said.
“The operations of the above committees have contributed to
the stability currently prevailing on prices and foreign exchange markets.”
The country’s total reserves, including gold, currently
stand at approximately US$540 million, significantly higher than the reserve
money, which amounts to about ZiG4 billion (equivalent to US$155 million),
providing a reserve cover of more than three times.
This represents a substantial increase from the US$285
million in foreign reserves held when ZiG was introduced in April.
The total foreign reserves of US$540 million (ZiG14
billion) now notably exceed the total deposits in the banking sector, which
currently stand at approximately ZiG12 billion (equivalent to US$467 million)
Sunday Mail
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