Zimbabwe to ditch forex interbank system

Ndakaziva Majaka 

ZIMBABWE is planning to adopt a market-based foreign currency trading system after its fixed exchange rate system saw the domestic unit – whose official rate is 25 to 1 against the US dollar – lose considerable ground.

Market watchers have long argued that a fixed rate leads to distortions.

The Monetary Policy Committee has now proposed a market-based system. 

This follows a cocktail of measures from the country’s monetary and fiscal authorities to save the domestic currency from further battering on the street.

“The committee welcomed action taken by the central 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 would be put in place,” Reserve Bank of Zimbabwe Governor Dr John Mangudya said in a statement on Monday.

The RBZ also cut the statutory reserve ratio – a portion of a bank’s deposits that is deposited with the central bank in an interest account – from 4.5 percent to 2.5 percent to avail financial resources for productive sectors. 

“As part of efforts in the recovery and growth of the productive sectors of the economy… It was resolved that there was need to release financial resources…To assist that process, the Committee resolved to reduce the statutory reserve ratio from the current 4.5 percent to 2.5 percent with effect from 8 June.”

Furthermore, the MPC reinstated the requirement for exporters to liquidate their unused forex earnings within 30-days. 

The requirement had been suspended only in March.

Other resolutions include the use of Open Market Operation Bills to mop excess liquidity.