Prosper Ndlovu, Business Editor
THE Reserve Bank of Zimbabwe (RBZ) has given consumers and businesses greenlight to trade in foreign currency and suspended, until further notice, any increase in charges related to the provision of electronic payments.
The decision puts on hold the mandatory use of the local currency alone in domestic transactions adopted since return to Zim dollar in June last year. As part of its monetary interventions in response to the financial vulnerabilities caused by Covid-19, the Apex Bank has also shelved its ‘managed floating exchange’ model and adopted a fixed exchange rate system at the current interbank level of $25 to the US-dollar.
Interest rates have also been slashed to 25 percent from 35 percent while funding towards the productive sector by the Bank has been increased to $2.5 billion from $1 billion.
In a statement late yesterday, RBZ Governor, Dr John Mangudya, said the interventions feed into the comprehensive national strategy announced by President Mnangagwa this week Monday to mitigate against the devastating impact of Covid-19. The deadly pandemic has spread across the world with a paralyzing impact on economies since its outbreak in China last December. Zimbabwe has also been affected with three positive cases and one death. As more countries shift to lockdowns, international trade has been crippled with the country suffering drastic drop in the tourism earnings as more companies also trim down operations to protect their workers and clients.
In that regard, Dr Mangudya said the decision allow free trade in forex takes into account the country’s limited access to foreign finance, which is adversely affecting the country’s balance of payment position.
“Government, through the Reserve Bank of Zimbabwe (RBZ) would like to advise the public that it is making it easier for the transacting public to conduct business during this difficult period by making available an option to pay using free funds for goods and services chargeable in local currency,” he said.
“The dispensation to use free funds will also promote social distancing as banks will be able to provide digital financial services to their customers that include producers of gold, tobacco and cotton and recipients of Diaspora remittances.”
To buttress the above, Dr Mangudya said digital financial transactions will be scaled up to enhance confidence in the economy and assist banks to play a critical role as systemic stabilisers of the economy during the unprecedented Covid-19 period.
“The Bank also agreed with the banking sector to suspend increases in charges related to the provision of electronic payments during these trying times. Similarly, the Bank is also engaging the mobile network providers to ensure that their mobile banking charges are reduced in order to promote electronic banking, which is in line with social distancing,” he said.
Related to the above measures, Dr Mangudya said Government has resolved to suspend the managed floating exchange rate, which was introduced early this month, so as to provide for greater certainty in the pricing of goods and services in the economy. The managed float system was yet to make positive impact on the economy as it attracted limited trading so far amid a thriving parallel market whose influence continues to spike price escalation and distort the cost structure in the economy.
“In its place (managed float system) the bank has, with immediate effect, adopted a fixed exchange rate system at the current interbank level of ZW$25 to the US-dollar. This measure will be reviewed when markets stabilise from the effects of COVID-19,” said Dr Mangudya.