Increase foreign currency supply: IMF

BY FIDELITY MHLANGA

THE International Monetary Fund (IMF) says Zimbabwe must step up efforts to increase foreign currency supply and allow exporters to sell their earnings directly on the interbank market to improve liquidity.

The Reserve Bank of Zimbabwe (RBZ) introduced the market back in February as part of monetary measures to facilitate the availability of foreign currency and tame a thriving parallel market, but the platform has failed to excite the market with few trades taking place.

Business has on several occasions complained about unavailability of hard currency on the interbank market.

“Deepening the interbank foreign currency market is essential for it to function as the basis for a market-determined exchange rate and to close the parallel market spread. Staff encouraged the authorities to take steps to increase the supply of foreign currency in the market, including by allowing exporters to sell directly into the interbank foreign currency market the amount they are required to surrender to the RBZ, which would allow for an effective price formation,” the fund said in a recent statement.

The IMF has approved a Staff Monitored Programme for Zimbabwe which will run to the end-December 2019.

“Existing exchange controls, which limit foreign currency purchases in the official interbank market for current account transactions, would continue to control demand for foreign currency, but the sanctioning and enforcement framework would be applied transparently and uniformly,” the statement added.

The IMF added that to move towards a unified exchange rate, any subsidies for specific goods or sectors such as fuel and medicine should be channelled through the budget, not through administered exchange rates. Authorities have since removed fuel subsidies.

RBZ deputy governor, Kupukile Mlambo, told a recent business meeting that around US$120 million had been traded on the platform since February.

Economist Persistence Gwanyanya, however, said the market was still not well developed to encourage trade.

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