RBZ unveils new measures; US$ to be sold at market determined exchange rate – NewZimbabwe.com

By Alois Vinga

THE Reserve Bank of Zimbabwe (RBZ) Monetary Policy Committee Tuesday announced new measures which will see available foreign currency being sold at market determined rates via the interbank plus a slight hike of interest rates.

The developments come at a time when authorities are battling to contain ZW$ depreciation after exchange rates tumbled rapidly on the official and parallel market in recent weeks to reach US$1: ZW$ 3 700 on the Auction market and around US$1: ZW$ 4 000 on the parallel market.

Retailers and the business community have swiftly responded, adopting forward pricing by pegging the t prices at much higher premiums way above the obtaining rates, leaving ordinary citizens struggling to afford basic commodities.

The business community has levelled the blame on a poorly regulated exchange rates market which is failing to live up to the standards of market determined premiums, thereby causing distortions in the economy.

Responding to the demands, RBZ governor John Mangudya announced a raft of measures aimed at achieving market determined outcomes targeting both the US$ supply and demand side factors.

“With effect from 7 June 2023, the bank shall sell foreign currency at the market-determined exchange rate through banks to support and strengthen the foreign exchange interbank market, and banks shall in turn sell the foreign currency to their customers.

“This measure is calculated to ensure that the interbank forex market is the primary source for foreign exchange needs in the economy and that the foreign exchange auction system shall continue to operate for meeting smaller requirements for foreign payments and for continuous price discovery,” he said.

In order to ensure that the interbank forex market is self-financing, the 90-day liquidation requirement on export proceeds will fall away.

The current interbank maximum trading limits were reviewed upwards from US$100 000 to US$500 000, consistent with the current auction limits

Mangudya also announced that the Main and MSME auction will be merged under the US$5 million per week policy, with bid limits of a minimum of US$1 500 and a maximum of US$50 000.

The trading margins charged by banks on foreign exchange transactions will be aligned with international best practices.

On the demand side, the MPC resolved to increase the interest rates from 140% to 150% per annum, in response to the recent increase in inflation and the Medium-term Bank Accommodation (MBA) interest rate from 70% to 75% per annum.

Statutory reserve requirements were increased from 10% to 15%, while maintaining savings and time deposit requirements at 5%.

“The Bank remains committed to continuing with the current tight monetary policy to restore and sustain the exchange rate and inflation stability. To date, the Bank has sold to the market ZW$31,8 billion and ZW$35,2 billion worth of gold coins and gold-backed digital tokens, respectively.

“The rolling out of digital tokens for transactional purposes in the second phase, which is projected to commence during the month of June 2023, will buttress the current stabilisation measures,” added Mangudya.