The Reserve Bank of Zimbabwe, just hours after the termination of the multicurrency system, yesterday moved to strengthen the Zimbabwe dollar by introducing a raft of measures.
Observers view the measures as a way to stifle the parallel foreign currency market, while at the same time improving the efficiencies of the official interbank foreign market.
The measures include directing local financial institutions to transfer to the central bank the RTGS$/ZWL$s that they are holding as counterpart funds for the foreign currency historical or legacy debt that Government, through the Reserve Bank, is assuming at the rate of 1:1 between the RTGS$ and the US$.
RBZ governor said the move is targeted to “mop around ZWL$1.2 billion from the market by the end of this week.”
There will also be an adjustment on the interest rate on the Reserve Bank overnight window upwards from the current 15% per annum to 50% per annum in line with infl¬ation trends.
The monetary authorities have also proposed to remove administrative limits on the operation of bureaux de change and on the cap on margins for banks for interbank foreign exchange transactions; as well as to put a vesting period of 90 days on disposal of dual listed securities or shares purchased by investors on the Zimbabwe Stock Exchange.
And perhaps more importantly, the RBZ has proposed to increase supply of foreign currency into interbank foreign market by ensuring that at least 50% of the surrender portion of foreign currency is sold to the interbank market.
“This will be supplemented by the use of Letters of Credit (LCs) for the importation of essential commodities that include fuel, cooking oil, and wheat. The Bank has put in place LCs amounting to US$330 million for this purpose,” said Dr Mangudya.
The combined effect of these proposals is to stifle the parallel foregn currency market, but the long-term impact of these measures and that of the re-introduction of the Zimbabwe dollar will only become clearer in the long-run.
Yesterday, Finance and Economic Development Minister Mthuli Ncube announced the scrapping of multiple currencies, introduced in 2009, and the re-introduction of the Zimbabwe dollar as the sole legal tender.