IN a major policy shift, the government has agreed to float the exchange rate, thus effectively doing away with the RBZ auction system.
The auction system has bee
n in place for 22 months during which it failed to increase foreign currency inflows.
Insiders at the Reserve Bank of Zimbabwe said they had “struggled” to get the nod from government to float the currency.
In his third-term monetary policy presentation yesterday, Reserve Bank governor Gideon Gonosaid in line with market developments as well as inflation trends, the auction rate had been allowed to periodically adjust to support exporters.
“Against this background of incisive inputs from stakeholders, as well as the growing need for allowance of the interplay of market forces in promoting allocative efficiencies in the foreign exchange market, it has become necessary that, with immediate effect, a new foreign exchange management system be introduced,” Gono said.
“Under this framework, which replaces the existing auction system, the Tradable Foreign Currency System, all exporters will retain 70% of their export proceeds in foreign currency, and sell the remaining 30% at the official auction rate determined and announced to the market from time to time.”
Initially, Gono said the rate would be set at the prevailing exchange rate of US$1:$26 000.
Under the new system, corporate FCA balances would be retained for up to 30 days, after which the unutilised remainder would be liquidated onto the interbank market.
Holders of free funds, including individuals, embassies, international organisations and Zimbabweans in the diaspora, can sell their foreign exchange in the interbank market at the market rate.
However, all importers, save for government and other strategic and social payments, will access foreign exchange from the interbank market at the market rate.
The new policy, which analysts expect to increase inflows of foreign currency into the formal system, is bound to catch a number of banks unaware as most of them had long abandoned the use of foreign exchange electronic boards.
Another challenge is to determine the interbank rate.
The International Monetary Fund has said there is need to eliminate foreign exchange restrictions, multiple currency rates and surrender requirements.
The IMF recommended that as a first step towards unification of the exchange rate, the official exchange rate should be depreciated substantially by 60-65% based on the June data. – Staff Writer.