Zimbabwe's Finance and Economic Development Minister Mthuli Ncube addresses a press conference in Harare, Zimbabwe, March 11, 2020. (Xinhua/Shaun Jusa)
The Zimbabwe government has introduced a managed floating exchange rate system and set up a Currency Stabilization Task Force as it struggles to contain runaway inflation caused by exchange volatility.
HARARE, March 12 (Xinhua) -- The Zimbabwe government has introduced a managed floating exchange rate system and set up a Currency Stabilization Task Force as it struggles to contain runaway inflation caused by exchange volatility.
The exchange volatility has seen black market rates shoot through the roof while the interbank rate remains stagnant.
Finance and Economic Development Minister Mthuli Ncube told a press conference that the recent exchange rate volatility had translated into "unsustainable levels of inflation".
The finance minister will chair the Currency Stabilization Task Force which will include members of the Reserve Bank of Zimbabwe (RBZ) Monetary Policy Committee and Presidential Advisory Committee, meeting at least once a week to review the conditions in the market and monitor the behavior of key variables such as the exchange rate and inflation.
Ncube said Zimbabwe had not had a transparent and effective foreign exchange trading platform for a long time and official rates had as a result not been effectively determined while a thriving parallel market developed.
"To correct this anomaly, an electronic forex trading platform based on the Reuters system is being immediately put in place. This platform will allow foreign exchange to be traded freely among the banks and permit a true market exchange rate to be determined," he said.
Market analysts have been accusing monetary authorities of folding their hands and manipulating the interbank rate while black market rates spiraled out of control and caused prices to rise haphazardly.
The Zimbabwe dollar (ZWL) has been losing between 2 percent and 5 percent per day to the U.S. dollar and as of Tuesday, the black market rate was 1 USD to 36.5 ZWL while the interbank rate was 1 USD to 18.2 ZWL.
On Wednesday, the interbank rate was 1:18.3 while the black market rate shot up to 1:39.5.
Ncube said bureau de change would also participate on the same platform through their authorized dealers.
"The trading rules of the bureau de change are being liberalized so that they can conduct all wider range of transactions," he said.
RBZ will monitor daily exchange and intervene as necessary and shall release forex into the interbank market based on a well-defined forex stabilization policy, he added.
He said RBZ was currently reviewing all the regulations covering mobile money platforms as it sought to stop their use by unscrupulous businesses to illegally trade foreign exchange and undermine the economy. ■
