Leonard Ncube in Victoria Falls
THE Reserve Bank of Zimbabwe (RBZ) has said demand for foreign currency in Zimbabwe is not too high and that the rising parallel market exchange rates were a result of speculative behaviour driven by a cartel of few individuals.
In a recent interview here RBZ deputy governor, Dr Kupukile Mlambo, called for patience saying the monetary authority was implementing measures to tame rampant indiscipline and restore financial sanity.
He said the inter-bank forex trading platform was being fine-tuned to effectively stabilise the economy but said it was too early to evaluate its impact within a few months of its existence.
Dr Mlambo explained that exchange rate distortions on the parallel market were driven by speculation fuelled by a cartel of individuals and not by high demand for foreign currency.
“From the Central Bank perspective we are quite satisfied with the way the interbank market has been working. It’s just three months old so it’s still very early to say it’s not working or working but the progress that we have made is very useful,” he said.
“Effective demand for foreign currency is not as high as people think because that is backed by the RTGS balances, which are not higher. What’s driving the parallel market is not really a high demand of foreign currency but there is a lot of speculation and my guess is that those who play in that market are not very many.”
Although he acknowledged the prevailing pricing challenge, which has seriously spiked inflation and the cost of living in recent months, Dr Mlambo said it will take time for normalcy to prevail in the currency market.
“Of course there have been challenges in the sense that we realised that although that this was a willing buyer-willing seller market, there was very little of selling so we have now changed and said it now becomes a willing seller-willing buyer allowing the sellers of foreign currency to quote a price that they want,” he explained.
“But at the same time we also needed to provide support for that sector and that’s why we have got that $500 million that was announced by the governor (Dr John Mangudya). The idea is that we want to stabilize the rates and narrow the gap between the official interbank market rate and the black market rate.
“It will take time obviously and I think we should not expect a magic wand to solve our foreign currency problems once and for all but this facility will help in narrowing the gap and stabilizing the rates.”
The deputy governor said Government has pinned its hopes on among other things, continued intervention in the market as well as the tobacco selling season reaching its peak for more foreign currency earnings. Government has pledged to intensify its efforts to deal with cartels and stamp out speculative tendencies that were causing distortions in the market.
Dr Mlambo said Government was aware of a cartel of few unscrupulous people driving the black market through speculation.
“I think that the more we manage well and design better the interbank market we will eventually begin to tackle that problem,” he said.