Market-determined Exchange Rate Came Too Late - Prof Mugano
Economist Professor Gift Mugano says the measures announced by the Reserve Bank of Zimbabwe (RBZ) on 06 June to address the recent volatility in the exchange rate and prices of goods and services in the economy are commendable but came too late.
In a statement issued on Tuesday, RBZ Governor John Mangudya said with effect from 7 June 2023, the RBZ “shall sell foreign currency at the market-determined exchange rate through banks to support and strengthen the foreign exchange interbank market, and banks shall, in turn, sell the foreign currency to their customers.”
Following the announcement, the Zimbabwean Dollar further lost its value against the US Dollar, from ZWL$3 673 on Tuesday to ZWL$4 868 on Wednesday.
Mugano said the new measures should have been introduced in February 2019 when the interbank was introduced. He said:
We are now implementing the right policies too late. We should have done this on 20 February 2019 when the interbank was introduced. This is too late!
At this rate, wages, pensions, the national budget and capital will be wiped out. Prices will hit the roof. It’s getting worse!
Without any doubt, Treasury has to: urgently revisit the national budget, make an urgent upward review of salaries and pensions, and review the budget for contractors
As these reviews will be done, more liquidity will be poured into the market – adding paraffin on [the fire].
On Wednesday, 07 June 2023, the RBZ conducted the first Wholesale Foreign Exchange Auction.
19 bids were received from banks, with a total of US$11 180 000 allotted to 10 bids.
The highest bid rate received was 5,020.0000 while the lowest bid rate allowed was 4,500.0000.
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