Harare – The Reserve Bank of Zimbabwe (RBZ) has effectively liberalised the exchange rate and forgone the 1:1 exchange rate in a latest move headlined by establishment of an inter-bank forex market as it seeks to bring sanity in the foreign currency market and stabilise prices of goods and commodities.
The issue of currency reforms has been the subject of debate in the build-up to the presentation of the monetary policy with some going as far as advocating for the return of the Zimbabwe dollar. This was all coming up in the wake of a surge in foreign currency exchange rates, high prices on the market coupled with price distortions and an acute shortage of foreign currency.
While presenting the 2019 Monetary Policy (MPS2019) in the capital today, RBZ Governor, Dr Mangudya said the Bank has considered the implications as mentioned, thus the decision to introduce an inter-bank forex market.
“After taking account of the implications and putting in place safeguards to maintain stability in the fares market, the Bank is with immediate effect, establishing an inter-bank foreign exchange market in Zimbabwe to formalise the trading of RTGS balances and bond notes with USSs and other currencies on it willing-buyer willing-seller basis through banks and bureaus de change,” he said.
Likewise, the Bank has prepared a legal framework for denominating the existing RTGS balances, bond notes and coins in circulation as RTGS dollars “in order to establish an exchange rate between the current monetary balances and foreign currency.”
The address highly points out that the Central Bank is paving way for the return of the Zimbabwean dollar which the Finance Minister, Professor Mthuli Ncube said is going to return this year.
Dollarisation, which was adopted in 2009 has in the long run resulted in Zimbabwe becoming a high cost economy and is experiencing perpetual cash shortages.
University of Zimbabwe professor of economics, Ashock Chakravati speaking on steps to Zimbabwe’s economic recovery, made recommendations which seems very much in line with the direction taken by the central bank.
“Introduce Hybrid Forex Management system based on Nigerian auction model. Under this model, there would be 50% retention from all exporters by RBZ at 1:1 which will ensure adequate forex for essential imports and maintain price stability,” he said.
He said the platform will among others provide the basis for a transparent system which eliminates discretion and corruption, proper pricing of forex will reduce prices and inflation as well as creating a basis for the introduction of local currency at a later date.
Likewise, Mangudya said the use of RTGS dollars for domestic transactions will eliminate the existence of the multi-pricing system and charging of goods and services in foreign currency within the domestic economy as well as forex exchange rate stability to restore value of money to tackle inflation.
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