Reserve Bank of Zimbabwe (RBZ) governor John Mangudya said that recent official exchange rate adjustments will help in mopping excess liquidity in the market and stabilising the currency and prices.
Following the introduction of the willing-seller willing-buyer policy, the forex auction and interbank rates reached US$1:$366 and US$1:$371, respectively.
Last week, the Zimbabwe dollar was trading at around US$1:$700 on the parallel market.
The country’s inflation rose to 191,7% in June from 131,7% last month, as price hikes continued.
In a presentation made on his behalf by William Manhimanzi, RBZ deputy director for financial markets, during the just-ended Zimbabwe National Chamber of Commerce annual congress in Victoria Falls, Mangudya said:
Recent official exchange rate adjustments will help in mopping excess liquidity and thereby stabilise the exchange rate and inflation in the outlook period.
Decisions by the MPC (Monetary Policy Committee) to pursue a positive real interest structure are expected to support the stability of the exchange rate.
The interbank willing buyer willing seller is now the benchmark price of forex in the economy.
The forex auction system will continue with the auction rate being informed by the willing buyer willing seller exchange rate.
The Interbank forex system is constrained by a lack of trading amongst banks due partly to compliance and geopolitical crisis.
Mangudya implored business to discard speculative pricing models saying they are inflationary and unsustainable. He said:
We need to work together to reduce speculative pricing models as these are not good for the economy, they are inflationary business models and not sustainable.
We are punishing ourselves and the consumers, they further erode and undermine business confidence and are therefore counterproductive.
Current strong economic fundamentals, coupled with recent policy measures will foster a positive economic outlook.
Consequently, the current dual currency (multi-currency) system is the most appropriate payment and transacting system for the country.
It’s the best of both worlds. Let’s all jealously guard it. It’s good for everyone.
The central bank governor said the balance of payments position was strong.
He said the country was generating adequate foreign currency with US$9.7 billion received in 2021 against foreign payments of US$7 billion. Said Mangudya:
The foreign receipts for 2021 are the highest ever since. The country has so far received foreign currency amounting to US$4.5 billion as of May 31, 2022, around a 34% increase from the same period last year.