Zimbabwe is reportedly considering setting up a currency board to support the weak Zimbabwean dollar which is losing value rapidly even on the official forex auction.
On Wednesday, 10 August 2022, the foreign exchange weighted average rate fell to US$1: ZWL$478.6358 from US$1: ZWL$458.3653 announced by the RBZ last week.
Speaking at an economic conference in the resort city of Victoria Falls on Thursday, Ashok Chakravarti, a member of the Reserve Bank of Zimbabwe’s monetary policy committee (MPC), said:
The issue of the currency board is being looked at. It’s been done by 40 countries before, but it also requires a substantial amount of reserve money. It is being considered.
According to online sources, a currency board is an extreme form of a pegged exchange rate.
The management of the exchange rate and the money supply is taken away from the nation’s central bank if it has one.
In addition to a fixed exchange rate, a currency board is also generally required to maintain reserves of the underlying foreign currency.
Bloomberg reported Chakravarti as saying Zimbabwe will need about US$700 million to back the domestic money in circulation.
More: Bloomberg