Online Reporter
Tapiwanashe Mangwiro, Zimpapers Business Hub
WITH local currency inflation now at single-digit levels for the first time in three decades and the gap between official and parallel exchange rates narrowing to just over 20 percent, Zimbabwe is seizing the moment to push ahead with the final phase of its foreign exchange market liberalisation.
This push towards a more liberalised foreign exchange market will allow the exchange rate to reflect actual demand and supply conditions, improve price discovery and reduce market distortions, economists say.
A more liberal foreign exchange market will usher in a competitive market and gradually reduce the need for regular central bank intervention.
Under the willing-buyer, willing-seller (WBWS) system, the Reserve Bank only intervenes in the interbank market to smooth excess volatility and to ensure that the foreign exchange market clears.
Zimbabwe is on course for an efficient foreign currency trading system, driven by broad interventions to deepen reforms in the foreign exchange market, according to the International Monetary Fund (IMF).
While the authorities have transitioned to a market-driven WBWS framework through commercial banks, the global lender contends that the central bank still retains some regulatory controls, including through export surrender requirements and active liquidity interventions.
Zimbabwe has in the past faced economic instability challenges, high inflation and increased informalisation due to foreign currency market distortions and wide gaps between official and parallel exchange rates.
Zimbabwe has, however, made significant strides in closing the loopholes, as evidenced by the drop in annual local currency inflation to single-digit levels, the first in over three decades, and a narrow exchange rate premium, which is now just over 20 percent.
In its first review under the Staff-Monitored Programme (SMP), IMF said the Reserve Bank of Zimbabwe (RBZ) is finalising the development of a new, more efficient foreign currency trading system.
The measures will improve price discovery, while the platform will cover transactions between banks and their clients.
Proceeds from foreign currency surrender requirements will also be channelled through it.
This has already been revealed by RBZ Governor Dr John Mushayavanhu in his 2026 Monetary Policy Statement (MPS).
“To improve the efficiency of the interbank foreign exchange market under WBWS and as part of the broader efforts under NDS2 (National Development Strategy 2), the Reserve Bank is developing a new foreign exchange trading platform for authorised dealers,” reads the 2026 MPS in part.
“In this regard, the Reserve Bank is working on a strategy to set up a transition path to a more competitive, transparent, credible, efficient and flexible foreign exchange market.”
The new foreign exchange trading platform is expected to help promote greater interplay of market forces and price discovery in the foreign exchange market. It will be introduced to the market in due course.
Industrialist Dr Nxaba Ndiweni said the planned liberalisation of the foreign exchange market could improve transparency and give businesses greater certainty in pricing and planning, while cautioning that reforms should be implemented gradually to avoid volatility.
“A more liberalised foreign currency market would give businesses greater certainty on pricing, planning and access to foreign currency,” he said.
“If the formal rate better reflects market conditions, it can narrow the gap with the parallel market and improve confidence in the ZiG (Zimbabwe Gold).
“However, the process must be carefully sequenced. A sudden liberalisation could create exchange-rate volatility and disrupt business costs. The Government should gradually increase flexibility while ensuring adequate liquidity, transparency and confidence in the formal market.”
The RBZ has already completed pilot user acceptance testing with five banks and is now incorporating feedback ahead of a full rollout. The World Bank is supporting the process, with a final assessment report due by the end of this month.
According to the IMF, the authorities will use that report to support final user acceptance tests with all 23 authorised dealers and finalise the foreign currency trading system by the end of September, with the platform expected to go live in the last quarter of the year.
The new system forms part of a wider Comprehensive Foreign Currency Market Liberalisation Strategy that the RBZ and the Ministry of Finance, Economic Development and Investment
Promotion are jointly developing, which the IMF has set as a structural benchmark for the end of September.
“The strategy should establish what monetary and foreign currency policy framework would be most suitable for Zimbabwe and develop a properly sequenced transition path with clear milestones and deliverables,” the IMF said.
Economist Mr Liberty Mbiba said a more liberalised foreign exchange market would allow the exchange rate to depict actual demand and supply conditions, improve price discovery and reduce distortions between formal and informal markets.
“Greater liberalisation would improve price discovery by allowing the exchange rate to better reflect genuine demand and supply,” he said.
“A transparent formal market would also reduce reliance on the parallel market and strengthen confidence in the ZiG.
“However, liberalisation must be gradual. Moving too quickly could trigger exchange rate volatility, speculative demand and inflationary pressures.
“The Government should sequence reforms alongside stronger reserves, fiscal discipline and clear communication to ensure the market remains stable.”
The IMF welcomed steps already taken, noting that RBZ policies had stabilised and narrowed the parallel market premium and contained uncovered foreign currency demand, while the central bank had revised its calculation of the daily reference exchange rate to make it a weighted average of all transaction prices.
The IMF was candid about the risks, cautioning that “the external position has weakened somewhat and that, given the weakening of the current account from lower gold prices and the recently somewhat higher foreign currency interventions, the RBZ should stand ready to tighten the policy stance if pressures intensify.”
The reforms come against the backdrop of a resilient economy, with the IMF projecting growth of 5 percent this year, moderating to 4.2 percent over the medium term, and inflation expected to remain in single digits.
Completion of the first SMP review, which the IMF management has already approved, is seen as a critical step towards Zimbabwe’s broader re-engagement agenda, including arrears clearance and debt resolution with international creditors.
