Harare – Reserve Bank of Zimbabwe (RBZ) Governor Dr John Mangudya has said that more foreign currency is being sold through formal channels with US$664 million traded as at June 30, 2019, while highlighting that there is a reduction of foreign currency trading on the parallel market.
He said this during the Daily News Business Breakfast Forum, “Implications of The New Currency” on Monday morning.
On June 24 2019, government through Statutory Instrument (SI) 142 of 2019 abolished the use of British pound, United States dollar, South African rand, Botswana pula and any other foreign currencies, as legal tender.
Dominating the discourse has been questions over the movement of prices and exchange rates as a response to the monetary policy changes.
On its part, government maintains that the enforcing of SI142 is a critical step to promote domestic competitiveness and promote growth, tame inflation and correct the price distortions in the foreign exchange market.
The interbank market has struggled to remain liquid since its introduction earlier in February this year and has since failed to converge with parallel market rates which prior to the introduction of SI 142 reached a high of RTGS$1:US$14.
While rates on the parallel market tumbled temporarily following the announcement of SI 142, rates on the official foreign exchange market continued to gain traction while some retailers and business operators like Simbisa Brands cut prices for some of their products.
The lack of consistencies in the market trends has further fuelled confusion as to which direction the economy is heading following the major monetary policy changes.
Dr Mangudya said that almost US$9 million was traded last week on the interbank market proving that the country is moving in the right direction.
“We are moving to normalcy, like in other countries,” he said.
Meanwhile, Finance Minister, Professor Mthuli Ncube said that SI 142 could be the last “Big Bang” change in macro-policies while maintaining that fundamentals are in place to support the contentious introduction of the new currency.
Equity Axis News
Raynold Mhotseka is a Journalism and Media Studies student at the University of Zimbabwe. He serves as a news writer at financial research firm, Equity Axis where he is currently on attachment.