Zimbabwe Central Bank Frees Exchange Rate

The Reserve Bank of Zimbabwe (RBZ) on Wednesday reintroduced a free-floating exchange rate regime and pledged to rein in an inflation scourge that has bedeviled the economy for the past eight years.

Presenting a post-election monetary policy statement in the capital Harare, RBZ governor Gideon Gono effectively discarded foreign exchange controls by announcing the introduction of a “willing-buyer willing-seller” market for hard currency.

Under the new regime, banks or authorized dealers will be allowed to purchase and sell foreign currency from individuals and companies at rates convenient to both parties.

“With these measures, we will be moving policies towards the interplay of market forces. Additional reforms will be announced in the next couple of days,” Gono said in a televised address.

The foreign exchange liberalization will do away with the current two-tier exchange rate regime comprising an official rate of 30,000 Zimbabwe dollars against one US dollar and a market-related parallel market rate as high as 200 million Zimdollars for every greenback.

Currently banks only sell foreign currency to government departments and state enterprises, while companies and ordinary Zimbabweans have to buy their currency from street dealers at up to 200 million Zimdollars per US dollar.

The new exchange rate regime would see banks matching the parallel market rate although there are worries over the short-term impact on the country’s inflation, already the highest in the world at nearly 165,000 percent.

Gono was upbeat of victory in the inflation battle and hiked interest rates from between 4,000 and 5,000 percent.

The central bank chief called for cooperation by all Zimbabweans in fighting the twin scourge of corruption as well as for the removal of Western sanctions on the country.

“Let me urge fellow Zimbabweans that the process of national healing is the only way forward for our country,” said Gono.

The Zimbabwe government has blamed the country’s eight-year economic crisis on Western sanctions, charges denied by the West which accuses President Robert Mugabe of mismanaging what was once one of Africa’s economic models.

Source African Press Agency

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