State Media
THE Reserve Bank of Zimbabwe (RBZ) plans to revert back to the market-determined exchange rate as the local currency continues to devalue under the fixed exchange rate of US$1:ZWL$25.
Due to persistent foreign currency shortage on the formal market, most businesses are getting the hard currency from the informal market where rates are pegged at above 1:60 to and 1:70.
The gap between the formal and informal market rates has continued to broaden creating an ordinate abitrage window where inflationary pressures have continued to maintain a bullish trend.
In a statement, RBZ Governor Dr John Mangudya said that following the Apex Bank’s Monetary Policy Committee meeting held on May 22, the committee considered a wide range of issues including reverting back to the market determined exchange rate.
“The committee welcomed action taken
by the bank to curb speculative trading in foreign exchange using electronic banking platforms. It was resolved that a formal market-based system of foreign exchange trading will be put in place,” he said.
Dr Mangudya said the committee expressed serious concern over the continued deterioration in the exchange rates that were widely being used by the private sector. He added that to ensure that foreign currency trades were monitored in real time, the committee urged RBZ to expedite the implementation of the electronic foreign exchange trading system for compulsory use by bureaux de change operators.
The committee also urged more active application of the Open Market Operations (OMO) Bills to deal with any identified excess liquidity balances in the market.
As part of efforts to assist in the recovery and growth of the productive sectors of the economy and to help with post Covid-19 recovery, the RBZ Governor said it was resolved that there was need to release more financial resources for the productive sectors of the economy by banks.
“To assist that process, the committee resolved to reduce the statutory reserve ratio from the current 4,5 percent to 2,5 percent with effect from 8 June 2020,” he said.
“The committee also resolved to reinstate, with effect from 1 July 2020, the 30-day limit of liquidating surplus foreign exchange receipts from exports in order to ensure that more foreign exchange was released onto the market.”
The RBZ boss said the committee also welcomed the monetary authority’s decision to introduce higher-denominated banknotes to the market through normal banking channels that are money supply neutral but urged the bank to enhance the process of dealing with and replacing soiled and damaged notes in circulation.
“The committee noted and appreciated the new cash withdrawal limit of ZW$1000 per week and that approved cash withdrawals of above ZW$1000 by business entities would need to be
closely monitored to eliminate abuse,” said Dr Mangudya.