Government, through the Reserve Bank of Zimbabwe, has once again come out making noise about securing a new US$500 million facility to supply the interbank foreign currency market, in a development monetary authorities say will go a long way in stabilising the exchange rates and prices of goods and services in the economy.
In what has become typical government fashion, the announcement was thin on detail and authorities will just not disclose the terms around the credit lines.
This will not be the first time that government has talked of such a facility. In his mid-term Monetary Policy Statement last October, the Reserve Bank of Zimbabwe (RBZ) governor, John Mangudya, said he was finalising discussions with the African Export-Import Bank towards a US$500 million Nostro Stabilisation Guarantee Facility to provide foreign currency account (FCA) holders with assurance that foreign currency shall be available on request.
In a subsequent monetary policy statement, where the establishment of the interbank platform would be announced, Mangudya made reference to another such mysterious facility, only saying a significant amount had been put into back the trading platform.
The belief in business circles was that the inter-bank market would generate an exchange rate between the real-time gross settlement dollar (RTGS$) and the US dollar in order to eliminate the distortion that had been plaguing the Zimbabwean economy and led to a three-tier pricing system.
But the central bank rate was too low to make an impact. It failed to solve the foreign currency shortage by providing a market-determined exchange rate through trading on a willing-buyer, willing-seller basis as had been anticipated.
When news of the latest credit lines hit the wires last weekend, the parallel market, which was at US$1:ZWL$7, cooled down a bit, only to pick up a few days later when government announced yet another hike in the price of fuel.
The market has started to question if the said money even exists. With government providing little information around these facilities and considering government’s poor track record in telling the truth, it is only natural that such suspicions arise, sending the market back into panic mode and rendering the interbank system useless.
It is high time authorities come clean on where they are sourcing these facilities and the underlying terms. This level of transparency will not only go a long way in rebuilding confidence in the market, but also in the whole system of governance.