Vusumuzi Dube
Judith Phiri, Business Reporter
THE Reserve Bank of Zimbabwe (RBZ) has injected US$50 million into the interbank foreign exchange market to ease demand for import requirements and consolidate the stability of the Zimbabwe Gold (ZiG) currency.
The development is in line with the features of a structured currency where international reserves are released into the market to sustain foreign currency demand by industry and commerce.
The RBZ adopted a market-determined system for setting exchange rates, with the auction system being replaced by a refined interbank foreign exchange market through which the commercial banks buy foreign currency from willing sellers and sell it to willing buyers, with the margins far lower than in the black market.
The weighted average of the rates at each bank form the interbank rates.
In a statement, RBZ Governor, Dr John Mushayavanhu confirmed the immediate injection of US$50 million into the interbank foreign exchange market, stating that it was necessitated by a rise in demand for foreign currency by industry and commerce to source inputs or raw materials.
“Since 5 April 2024, the Reserve Bank has been participating in the interbank foreign exchange market to supplement liquidity under the Willing-Buyer Willing-Seller (WBWS) trading arrangement.
“The participation of the Reserve Bank in the interbank market has helped to complement the supply of foreign currency by Authorised Dealers to meet demand by economic agents. In recent weeks, the Reserve Bank has witnessed a build-up in pipeline demand for foreign currency at banks, thus putting undue pressure on the foreign exchange market,” he said.
“In light of the above, the Reserve Bank is immediately injecting over US$50 million into the interbank foreign exchange market guided by the obtaining pipeline demand at banks as of 25 July 2024.”
He said consistent with the April 2024 Monetary Policy measures that introduced the ZiG currency, RBZ has been building foreign reserves which now stand at about four times cover of the reserve money.
The Central Bank Governor said the country continues to generate significant foreign currency to meet import requirements as evidenced by an almost 10 percent increase in foreign currency receipts during the first half of 2024 compared to the same period in 2023.
“Reflecting the significant foreign currency receipts, the bulk of foreign payments are currently being met by balances in foreign currency accounts (FCA). Going forward, the Reserve Bank remains an active participant in the interbank foreign exchange market to complement foreign currency supply under the WBWS trading platform to meet all genuine and bonafide foreign payments,” he added.
Dr Mushayavanhu said they were satisfied with the general acceptance and uptake of ZiG by the market and will continue to ensure currency and exchange rate stability in the macro-economy.
Introduced in April this year, ZiG is a structured currency backed by a reserve of foreign currency and precious metals, primarily gold, held by the RBZ.
Since its introduction in early April, the ZiG has shown incremental growth against the US dollar.
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