Finance minister, Professor Mthuli Ncube has announced that Zimbabwe will adopt a “managed float” exchange rate regime, abandoning strict control of foreign exchange by the central bank in the latest in a series of currency reforms that have so far failed.
The country, which has seen bouts of hyperinflation since the 2008, has taken steps to ease its heavy reliance on the U.S. dollar, part of a raft of economic reforms by President Emmerson Mnangagwa, who replaced longtime leader Robert Mugabe after an army coup in 2017.
Last June it made its interim currency the country’s sole legal tender, ending a decade of dollarisation and taking a another step towards relaunching the Zimbabwean dollar.
The central bank has controlled the interbank forex trading market, which was introduced in February 2019.
The latest move will see banks take a bigger role in foreign currency trades, narrowing the gap with the unofficial market by allowing trade on a more transparent platform.
“Zimbabwe has had no transparent and effective foreign exchange trading platform for a long time. Consequently, official rates have not been effectively determined, while a thriving parallel market has developed,” Finance Minister Ncube told reporters in Harare.
He said an electronic forex trading platform was being put in place immediately.
“This platform will allow foreign exchange to be traded freely among banks and permit a true market exchange rate to be determined.”
Last month the International Monetary Fund warned that delays by Zimbabwe in implementing foreign exchange and monetary reforms risked undermining the new currency and the government’s reengagement internationally on debt arrears. – Reuters.