Harare – Minister of Finance and Economic development, Professor Mthuli Ncube has said government will stay out of the foreign currency exchange market to avoid disrupting the market structure.
Government through the Monetary Policy statement 2019 presented by the central bank governor, Dr John Mangudya in February, introduced an interbank foreign currency exchange market, effectively liberalising the exchange rate between the local bond and the United States dollar.
Some analysts were however, sceptical about the interbank determination rate of 1:2.5 set by government saying it is in contrasts with the principle of market liberalisation. Indeed, the governor himself in his presentation said that the exchange rate will be market determined.
In an interview with Bloomberg on Wednesday, Ncube said government will improve the market infrastructure and allow it to trade free of government influence.
“We’re also trying to improve the market micro-infrastructure and architecture of that market and we will see it improve quite a bit over time and begin to fluctuate properly. It has allowed us to also introduce proper Monetary Policy,” said Ncube.
“Government will not be a participant in the market itself, we want to allow the market to participate, we will stay out otherwise we will disrupt the market.”
Ncube also said government will disclose the volume of trading in the new currency, a factor which has remained largely speculative since its inception. He said around $7.5 million was traded last week and according to some reports about $20 million was traded on the first week the RTGS dollar was introduced.
“Last week we traded around 7.5 million and this was just the beginning. I remember that for the last 10 years Zimbabwe had fixed currency trading 1:1 to the $US and so the trading has just started and it can only get better.”
The Minister also said government is removing the indigenisation rule which is discouraging foreign direct investment as part of promoting the Zimbabwe is open for business initiative.
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