By Oliver Kazunga
The Minister of Finance and Economic Development, Professor Mthuli Ncube, has announced that Zimbabwe will have a “new fully-fledged currency” within the next 12 months as Government moves to tackle distortions emanating from the disparity between the official and parallel market rates.
The country is using the RTGS dollar as a reference currency within the multi-currency and interbank foreign currency exchange system after Government in February abandoned the previous 1:1 rate between US$ and bond notes.
In a televised interview with Bloomberg TV in the United States on Thursday, Prof Ncube, who is in Washington DC for the International Monetary Fund and World Bank 2019 Spring Meetings, said:
“Zimbabwe plans to introduce a new, fully fledged currency in the next 12 months and to close the gap between the rate for dollars in the official and parallel markets using RTGS$, which the Government introduced in February”.
The country adopted a multi-currency regime in February 2009 after inflationary pressures had reached unprecedented levels in 2008.
Prof Ncube told Bloomberg that the Reserve Bank of Zimbabwe would soon increase interest rates as it moves to introduce a Central Bank reference rate as part of a host of measures to reignite the economy.
“We will soon increase interest rates in the sense that we do need to create a reference rate, which is the bank rate and we are establishing that.
“We have already re-established the role of the Central Bank as a lender of last resort and they need a bank rate. So, the rates will go up and that will stabilise the currency market but also help us manage the monetary policy in the first place,” he said.
Commenting on foreign currency shortages Zimbabwe was facing, Prof Ncube said the environment was expected to improve on the back of the tobacco marketing season, which was already underway.
“Of course, there is demand for foreign currency, foreign currency in the market is always short but we are looking forward to an improved tobacco season,” he said.
“We earn about a billion dollars globally so we expect that to stabilise the market over the next few months. Of course its early days, we just introduced the new currency regime literally a month ago so it’s trying to find its way and equilibrium, it will get there and close that gap between the parallel market and official floating market.”
Prof Ncube said the monetary authorities do not expect the RTGS dollar to come under pressure or money supply to grow because for the last four months the country has been running a surplus in terms of the primary deficit.
As such, he said, Government also expected month-on-month inflation to go on the negative in the next few months as a result of the currency reforms being implemented.
According to the Zimbabwe National Statistics Agency (ZimStat), the country’s month-on-month inflation rate in February was 1,67 percent, shedding 9,08 percentage points on the January rate of 10,75 percent.
This means that as measured by the All Items Consumer Price Index, prices increased by an average of 1,67 percent from January to February. The Chronicle