RBZ rules out interbank rate

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BY KUDZAI KUWAZA
THE Reserve Bank of Zimbabwe (RBZ) has ruled out using an interbank-driven exchange rate, saying a rate determined at the foreign currency auction system would remain in force.

An interbank rate is the interest rate charged on short-term loans between banks.

Banks may borrow or lend money among themselves to ensure that they have enough liquidity for their immediate needs, or to get rid of excess liquidity.

Business recently suggested that the exchange rate must be determined by this rate, instead of the auction system.

However, speaking during a CEO Africa Roundtable meeting in Harare yesterday, RBZ governor John Mangudya said the auction system, which was set up in June 2020 to provide cheaper foreign currency to business, would continue determining the official exchange rate.

“Many people have advocated for the interbank but the weakness of the interbank in this country is that banks do not trade among themselves because of many factors,” Mangudya said.

“We think that for now, for your planning purposes, let us plan using the auction system,” added the RBZ governor.

He said the RBZ would refine the auction system in order to improve its operations, along with efforts to make sure all funds allotted during auctions are disbursed within two weeks.

Firms participating at the auction system have been affected by delays, which have impacted their capacity to import raw materials, spares and equipment.

In mid-2021, the Confederation of Zimbabwe Industries said participants had not received about US$200 million.

“We are going to take appropriate measures to ensure that foreign currency allotments are settled timeously and ensure that discipline in the economy is enforced,” Mangudya told the meeting.

The central bank governor will unveil his plans in the first-half monetary policy statement, which he said would be presented on February 8.

Mangudya said about 70% of the US$1,7 billion which was allotted through the foreign currency auction system last year had gone to the productive sectors of the economy.

He said as a result of the funding, there had been an 80% increase in the availability of local goods on the market.

He said capacity utilisation in Zimbabwe’s industries had also improved.

The RBZ governor said through incentives availed by the central bank, gold deliveries increased to 29 tonnes last year, from 19 tonnes in 2020.

He said Zimbabwe was targeting gold deliveries to rise to between 35 and 40 tonnes this year.

Industry and Commerce minister Sekai Nzenza confirmed that there had been significant improvement in industrial performance in the past year.

“I am pleased to see that the auction system enabled a number of companies to access raw materials,” Nzenza said.

“We will continue to have dialogue with the private sector. We will continue to listen and we will continue to work together to ensure that the ease of doing business that we are talking about is a reality and when we talk about Zimbabwe being open for business it is also a reality,” she said.

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