By Almot Maqolo
RBZ to create a formal market-based system of foreign exchange trading
HARARE – The Monetary Policy Committee of the Reserve Bank of Zimbabwe expressed serious concern over the continued deterioration in the exchange rates that were widely being used by the private sector.
Following the introduction of the new currency – the Zimbabwe dollar – the exchange rate has deteriorated from 2.5 Zimbabwe dollars per US dollar in February 2019 to 65 Zimbabwe dollars per US dollar this month. However, the interbank rate is fixed at 1:25.
“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,” RBZ Governor John Mangudya said.
“To ensure that foreign currency trades were monitored in real time, the Committee urged the Bank to expedite the implementation of the electronic foreign exchange trading system for compulsory use by bureaux de change.”
The Committee urged more active application of the Open Market Operations (OMO) Bills to deal with any identified excess liquidity balances in the market.
Also, the Committee welcomed the Bank’s decision to introduce higher-denominated banknotes to the market through normal banking channels that are money supply neutral.
However, it 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,” Mangudya added.
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