The International Monetary Fund (IMF) has urged Zimbabwe to fully liberalise the foreign-exchange market to allow the rate to be determined by market forces.
According to a Bloomberg report, the IMF said the credibility and effectiveness of Zimbabwe’s currency reforms will depend on the “swift resolve” to liberalise the foreign exchange market.
Last week, the Reserve Bank of Zimbabwe (RBZ) loosened its grip on the foreign-exchange market but stopped short of free-floating the Zimbabwe dollar.
The central bank announced it will pursue a “market-determined” exchange rate instead of relying on a weekly auction, in a bid to tame price and exchange rate volatility.
The RBZ however said it will maintain “parameters” which include setting the floor price for dollar sales and the sale of foreign currency to banks for onward sale to their clients, in order to establish an interbank market.
In an emailed response to questions from Bloomberg, an IMF spokesperson said the recent measure by authorities aimed at establishing an interbank market is welcome, adding:
However, the parallel rate continues to depreciate… A convergence of the official and unofficial exchange rates is possible if the authorities accelerate the liberalization of the foreign exchange market, address the Reserve Bank of Zimbabwe’s quasi-fiscal operations to mitigate liquidity pressures and maintain an appropriately tight monetary policy stance to durably restore macroeconomic stability and ensure social stability.
A Zimbabwe dollar trades on the interbank market for 5 487 per US dollar, while the street rates on Monday ranged between 6 200 to 6 700 Zimbabwe dollars per greenback according to ZimPriceCheck.com.
More: Pindula News