Breaking News

RBZ to stabilise exchange rate

by Staff reporter
22 February 2019 | 3339 Views
The Reserve Bank of Zimbabwe (RBZ) says it has put in place adequate safeguards to ensure stability of exchange rates after the apex bank this week floated the US dollar on the interbank market.

Chief among the safeguards are control of broad money supply, restraint in Government expenditure, Treasury Bills, Reserve Bank savings bonds, interest rate adjustments and close monitoring of banks.

The RBZ liberalised the US dollar exchange rate against Real Time Gross Settlement (RTGS) balances, bond notes and all currencies in the multi-currency basket to formalise trade in currency.

Amid a pricing chaos, which has seen prices of goods and services tracking parallel market rates, the central bank took the decision to control trade in forex to ensure exchange rates stability and fairness.

Floating the exchange rate entails denominating existing RTGS balances, bond notes and coins in circulation as RTGS dollars to establish an exchange rate between current monetary balances and foreign currency.

This comes after the realisation that it was no longer tenable to maintain the exchange rate at fixed parity of one to one, which came after wild increases in parallel market rates late last year.

Since Zimbabwe dollarised in 2009 and authorities maintained the position of the multi-currency system—anchored by the US dollar–the market took guidance on setting prices in local currencies from premiums of greenback exchange rates on the black market.

There has been palpable fear that excessive printing of electronic dollars, by the previous administration, had released too much liquidity into the market, which could fan upward swings in the floated exchange rate.

Presenting the 2019 Monetary Policy Statement in Harare on Wednesday central bank governor Dr John Mangudya, said while the country apparently had huge bank deposits not all of it were usable.

Dr Mangudya also pointed out that out of about 3,2 million bank accounts, only 10 percent of those accounts held balances in excess of $1 000 of the now RTGS denominated dollars.

He made the remarks following assertions from economists that the huge electronic dollar deposits already in the system could spark runaway exchange rate increases, which would drive inflation.

But Dr Mangudya dismissed the possibility of an exchange rate rampage saying only $1,8 billion out of total market deposits of $10,2 billion was money that was usable for transacting purposes.

"The $10 billion of deposits in Zimbabwe is made up of the following characters: $4 billion of loans and overdrafts. So when you look at $10 billion that is not (all) usable money, that's deposits.

"In that deposit, $4 billion are loans and advances to the private sector; secondly, there are Treasury Bills that have been purchased by the banks, individuals and corporates of $3 billion.

"Treasury bills are about $2,5 billion. So the other $1,2 billion to $3 billion are savings bonds that these banks and other corporates had purchased from the Reserve Bank of Zimbabwe.

"So our usable money, now called RTGS dollars in the accounts today as we speak is $1,8 billion, not $10 billion. Today we have US$451 million over and above the $150 million we have put in place.

"Let us assume we have US$500 million or US$600 million and if you add the US$450 million plus the US$600 million, that becomes US$1 billion," the central bank chief explained.

Dr Mangudya said if for instance the floated exchange rate was one US dollar to 3 RTGS dollars and US$600 million was injected into the economy, all RTGS balances would be wiped out from the market.

The central bank said banks and corporates, if that happened, would be left holding on to Treasury Bills and RBZ savings bonds only and would in fact require liquidity support from the RBZ.

He said such a scenario, to avoid further inflationary buildup of excess liquidity in the market; the central could simply raise interest rates to prevent borrowing for non-productive purposes.

Exchange rate driven prices drove inflation from 5,4 percent in September 2018 to 56,09 percent in January 2019.

"So, safeguards (are there), you can try (to temper with the system). The exchange rates are just going to go down. There is a limit to which a bank can lend money, depending on their balance sheet.

"There is also a limit to which you can borrow money from the market to go and purchase currency because they (banks) will hit you with interest rates. So, we think we have put a soft landing."

The central bank says it will monitor banks closely in the trading of currencies to deter collusion and manipulation to ensure exchange rates stability, honesty and fairness.

Dr Mangudya said the central bank will sit down with banks to indicate to them the direction it wants things to take. He also pointed out that soon banks will need liquidity cover from RBZ.

This will allow the bank to use tools at its disposal, such as the accommodation rate to control flow and amount of liquidity going into the bank to avoid putting undue pressure on exchange rates.

Forex Exchange Rate

Source: business weekly


Latest News

Rocks from mountain crush huts in Zimbabwe

by City Press | 24 March 2019 | 2419 Views

'Tax reforms to rescue debt-distressed Zimbabwe'

by Staff reporter | 24 March 2019 | 693 Views

Afreximbank grants Zimbabwe interbank forex trade loan

by Staff reporter | 24 March 2019 | 778 Views

Zimbabwe volcano fears - The Civil Protection Department (CPD) in Masv...

by Staff reporter | 24 March 2019 | 3009 Views

Mnangagwa goes Biblical: 'Zimbabwe accepts will of God'

by Staff reporter | 24 March 2019 | 1083 Views

Open letter to President Mnangagwa

by Viniel Deredza | 24 March 2019 | 911 Views

Warriors ease into Afcon finals

by SuperSport | 24 March 2019 | 582 Views

Rights Commission finalising probe into Zimbabwe army crackdown - THE ...

by Staff reporter | 24 March 2019 | 163 Views

3 lawyers banned from practising - THREE lawyers have been banned from...

by Staff reporter | 24 March 2019 | 627 Views

Jabulani Sibanda to bounce back?

by Staff reporter | 24 March 2019 | 989 Views

Questions over Mnangagwa's choice of advisors - ON three occasions, Pr...

by Staff reporter | 24 March 2019 | 257 Views

Potraz board okays tariff increases

by Staff reporter | 24 March 2019 | 232 Views

Horror Cyclone destruction trail unravels - THE human toll of Cyclone ...

by Staff reporter | 24 March 2019 | 144 Views

LIVE: Zimbabwe vs Congo Brazzaville

by Staff reporter | 24 March 2019 | 3522 Views

Zimbabwe debt should be audited - ZIMBABWE should not rush to pay its ...

by John Kachembere | 24 March 2019 | 819 Views

Zimbabwean couple hijacked in Durban, wife missing since Monday - A Zi...

by Staff reporter | 24 March 2019 | 3760 Views

Mnangagwa's days numbered

by Staff repo | 24 March 2019 | 8094 Views

Zimbabwean man dies during sex with SA mistress - A  67- year-old...

by Staff reporter | 24 March 2019 | 3654 Views

Zimbabwean company donates laptops to needy SA varsity students - Zoro...

by African News Agency (ANA) | 24 March 2019 | 1043 Views

Gweru prophet sets up school of spiritual gifts - Gweru-born Prophet G...

by Staff reporter | 24 March 2019 | 491 Views

Potraz brings toll free platforms to rural folk

by Staff reporter | 24 March 2019 | 165 Views

Mnangagwa pledges support for Gukurahundi victims

by Staff reporter | 24 March 2019 | 417 Views

Zimbabwe banks must support the interbank trading - THE interbank mark...

by Andrew Lampard | 24 March 2019 | 264 Views

Robbing the poor in the name of patriotism - The post-Robert Mugabe ad...

by Tawanda Majoni | 24 March 2019 | 224 Views

'Using Air Zimbabwe will pose logistical problems for Mnangagwa' - Dep...

by Staff reporter | 24 March 2019 | 422 Views


Andy Muridzo promises new album

by Simbarashe Sithole | 18 March 2019 | 308 Views

Kwejani band is back! - AFTER an eight-year hiatus, Victoria Falls' su...

by Staff reporter | 13 March 2019 | 1189 Views

Moyo revives Pantsula genre

by Staff reporter | 10 March 2019 | 464 Views

Majaivana's sad farewell

by Bruce Ndlovu | 10 March 2019 | 6757 Views

Nceku shifts base to SA

by Staff reporter | 09 March 2019 | 827 Views

Baba Harare abandoned by band members - Jit musician, Baba Harare has ...

by Staff reporter | 04 March 2019 | 2050 Views

Winky D pays the price

by Staff reporter | 03 March 2019 | 5517 Views

Greatsoftline For All Of Your Software Needs

coupon and promo codes: greatsoftline for all of your software needswhile some online sellers have promotional services that reduce the overall amount you spent, others do not .you need to be on the lookout for the best outlets in order to chase th... Read More
ITnews 25 February 2015 ago

Samsung Gear Vr Innovator Edition For S6: The Perfect Vr Intro For Professionals

we're drenched in talk about the impending wave of consumer-facing vr headsets about to hit the market, starting at the end of 2015. by contrast, you can walk into a best buy right now and pick up the samsung gear vr innovator edition for the galax... Read More
Sergey 20 June 2015 ago