Oliver Kazunga/Pride Mahlangu/Sithembinkosi Saidi, Business Reporters
THE Reserve Bank of Zimbabwe (RBZ) Monetary Policy Committee has said the recent injection of new bank notes and coins into the system has resulted in significant decline in cash premiums.
In a statement, the Central Bank said the Monetary Policy Committee (MPC) held its third meeting last Friday after its recent inception where it deliberated on a number of issues. Among the issues discussed was the potential monetary policy implications of the 2020 national budget and the liquidity situation in the economy.
“The committee noted the positive developments following the recent introduction of additional bank notes into the system, which in particular has culminated in significant decline in cash premiums,” said RBZ.
Some unscrupulous businesses and individuals were taking advantage of the cash shortages by selling cash at high premiums of up to 60 percent. The net effect of such activities saw the transacting public being robbed of their hard-earned disposable income.
During its Friday meeting, the MPC also noted that the 2020 national budget has a potential expansionary impact on money supply, which limits the scope for tightening of monetary policy as required under the bank’s disinflation programme.
“In this regard, the committee directed the bank to re-calibrate the reserve money targeting framework,” reads the statement.
The committee welcomed the progress made towards the re-introduction and refinement of the Reuters System for foreign exchange trading following extensive stakeholder consultation and looks forward to its imminent operationalisation.
The RBZ said the latest framework for bureaux de change had been well received by the market. The Apex Bank has said it was looking to enhance the efficiency of the foreign exchange interbank market by introducing a new electronic trading platform.
The interbank market was introduced last February to normalise foreign currency trading and curb the inflationary parallel market. At the time of its launch, the interbank rate was initially pegged at 1:2,5 as a guidance rate. The RBZ then removed the guidance rate, and the local currency has been depreciating against the US dollar to trade at an average of 1:16 to the US dollar last week.
However, trades have been low with the parallel foreign currency market also subdued. Meanwhile, the RBZ is set to introduce a new electronic trading platform for the interbank market to improve the efficiency and increase the trading of foreign exchange through legal means.
Economist and member of the MPC, Mr Eddie Cross, said the market was enthused by the idea and that several banks were already keen to embrace the model.
“We have been working on introducing the system, which involves the commercial banks registering onto the system. So far, 15 of the 19 commercial banks have registered,” said Mr Cross.
He said the electronic trading system operations will begin when they finish working on the rules and regulations, which would apply in the foreign exchange market.
“As soon as we have reached a final agreement, of the regulations involved, we will then be starting operations,” said Mr Cross.
He said they expected to start operationalising the system in two weeks’ time.
The electronic system is expected to automatically calculate the exchange rate through the day, which will bring efficiency to the interbank market giving it an advantage over the informal sector.
“That will mean that now we have a formal market, which will indicate the real market rate other than relying on the informal markets for exchange rates, and we are hoping that gradually this market will attract the majority of foreign exchange in the country,” he said.