GOVERNMENT on Wednesday introduced a raft of measures to stabilise the exchange rate and bring down inflation to sustainable levels in order to achieve macro-economic stability after parallel market rates breached the US$1:ZWL40 barrier.
At a hastily arranged Press conference, Finance minister Mthuli Ncube said government had decided to implement a holistic package of key policy measures in order to stabilise the exchange rate.
“I am addressing you today against a background of recent exchange rate volatility, which has translated into unsustainable levels of inflation. In this regard, government is taking measures to stabilise the exchange rate and bring down inflation to sustainable levels in order to achieve macro-economic stability,” he said.
“Macro-economic stability is an essential component of the Transitional Stabilisation Programme (TSP), critical for economic growth and the achievement of the goals set out in President Emmerson Mnangagwa’s Vision 2030,” Mthuli continued.
“In order to stabilise the exchange rate and hence, to lower inflation, the government has decided to implement a holistic package of key policy measures. In this regard, a Currency Stabilisation Task Force (CSTF) has been set up. This will be spear-headed by the Ministry of Finance and Economic Development and the Reserve Bank of Zimbabwe,” Ncube added.
The Task Force would be chaired by the Minister of Finance and would meet at least once a week to review the conditions in the money market, monitor the behaviour of key variables such as the exchange rate and inflation, and ensure that the measures outlined by the minister are expeditiously implemented.
The Task Force will also be expected to put in place additional policy measures, where necessary, Ncube added.
Measures agreed and currently under implementation
Among measures that have been agreed to and are currently under implementation include foreign exchange management and introduction of a managed floating exchange rate system.
“Zimbabwe has had no transparent and effective foreign exchange trading platform for a long time. Consequently, official rates have not been effectively determined, while a thriving parallel market has developed,” Ncube said.
“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 amongst the banks and permit a true market exchange rate to be determined. The Bureaux de Change will also participate on this platform through their authorised dealers. The trading rules of the Bureaux de Change are being liberalised so that they can conduct all wider range of transactions,” noted the Finance minister.
“The RBZ will continue to be a significant player in the market, providing liquidity to stabilise the exchange rate, where necessary. This mechanism will be immediately operational. All the foreign exchange requirements will be available through the interbank market which will use a market determined exchange rate,” Ncube said.
The specific steps and measures to be taken by government and key stakeholders to ensure the success of this system are: The interbank market will be operationalised based on the Reuters system.
“All banks are invited to join and (the money) market will be stabilised by a ‘coalition of willing.’ The trading rules for the function of this market have already been agreed to.”
Government added that Bureaux are to be immediately liberalised as per RBZ rules.
