THE Reserve Bank of Zimbabwe (RBZ) yesterday suspended its ban on use of foreign currency in carrying out internal transactions and abandoned the managed floating exchange rate as a measure to facilitate the easy of transacting during the current coronavirus period.
By Everson Mushava
In a statement, RBZ governor John Mangudya said the measures were aimed at easing the financial pressures brought about by the global pandemic, which has claimed over 23 000 lives and infected close to half a million globally since its outbreak in Wuhan, China, in December last year.
The measures, according to Mangudya, are with immediate effect.
“Government through the RBZ would like to advise the public that it is making it easier for transacting public to conduct business during this difficult time by making available an option to pay using free funds (foreign currency) for goods and services chargeable in local currency,” the statement read in part.
“The dispensation to use free funds will not only make payment for goods and services easier, but 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.”
Added Mangudya: “Digital financial transactions will go a long way in enhancing confidence in the economy and assisting banks to play a critical role as systemic stabilisers of the economy during these unprecedented times.”
Zimbabwe has been facing serious economic challenges characterised by hyperinflation caused by currency volatility after the removal of the multi-currency system by government last year.
Business and opposition leaders have been calling for the reintroduction of the US dollar, but government has been flatly refusing, arguing the country could not survive without its own currency.
But Mangudya said use of free funds by the transacting public to buy goods and services domestically was a move to allow social distancing in the banking halls which are often crowded.
The new move will allow foreign currency depositors to use their bank balances to transact directly through digital means without visiting banks to exchange their funds at interbank rates.
Mangudya said producers of gold, tobacco and cotton and recipients of diaspora remittances would be the biggest beneficiaries.
“Related to the above measures, government, through the bank, has suspended the managed floating exchange rate system to provide for greater certainty in the pricing of goods and services in the economy. In its place, the bank has, with immediate effect, adopted a fixed exchange rate system at the current interbank level of ZWL$25 to the US$. This measure will be reviewed when markets stabilise from the effects of COVID-19,” Mangudya said.
He said the move would provide greater certainty in pricing of goods and services in the economy.
“The bank, with immediate effect adopted a fixed exchange rate system at the current interbank level of $25 against US$1. This measure will be reviewed when the markets stabilises from the effects of COVID-19,” he said.
Former Finance minister Tendai Biti said government had now conceded that use of the local currency was not viable.
“The regime has radically done a volte face and sneakily re-dollarised. We told them it wouldn’t work and won’t work. They owe Zimbabwe an apology and they should now bring a Bill to Parliament formally repealing those sections of the Finance Act that incorporated Statutory Instrument 33 and 142 of 2019 1/3,” he said.