Banks have started trading in foreign currency. They are doing this at a rate of 2.5 to the US dollar. This decision comes from the RBZ, or the Reserve Bank of Zimbabwe. This was done in an attempt to try and float the currency. The rate, according to a lot of observers could bring a lot of stability to the market. Yesterday, the governor told a lot of business leaders that the bank had met with other banks recently. He also announced that they had all agreed with the rate of 2.5. This is lower than the rate of 4.0, which is what is happening on the illegal market right now. This is done with some indication of a managed float. Banks will still operate under the guidelines that they have and they will also work hard to try and manage this. They have since come to a conclusion with bankers stating that they hope the rate will continue like it is right now.
They have also put a huge number of safeguards in place. This is going to ensure that the rate is going to stay as it is and that it is going to be stable as well. So far they do seem to be happy with the austerity measures that have been announced and this was done by the Ministry of Finance. There is far too much demand on the fiscus, and more needs to be done about this. The University of Zimbabwe leader and lecturer has stated that the concept of a float is actually successful in other countries. This includes Nigeria, but it could also work in this country too.
The best thing about it is that it gives the bank the chance to control the exchange rate. On top of this, it also lets them trade the RTGS balance on the USD at 1:1. Shortages however, have resulted in very high premiums for the US dollar and this has been done on the parallel market. This has then resulted in an increase of price and this could lower the prices. This has been pegged at 1:4 before and a lot of speculators have come forward to try and cash in on the foreign exchange. The inter-bank market are going to work with banks and even the bureaux change for a willing buyer or even a willing seller.
When you look at RBZ, you will soon see that the formalisation of a foreign currency is going to entail the denominating currency for the RTGS balance. The formalisation of the foreign currency will actually entail denominating the RTGS balances. The bond notes and even the coins that are in circulation right now are also going to have an impact. This is going to be done on the currency and the monetary balances. The RBZ governor has come out to say that a large portion of the currency is going to be allocated to the more productive sectors of the economy and this is going to have a huge impact on the way that things are done.
He has come out to say that 70% of the currency will be used for the sector imports and that it will also meet the requirements that are in place. 30% of the currency will then be used for other things. You cannot have $5 million dollars going towards buying a plane or even a private jet at the expense of companies such as Delta. Companies need to do everything they can to try and boost production because floating the US dollar will not enhance productivity at all. A lot of industrialists and even Zimbabweans have hoped that a managed-free float is going to bring some degree of sanity for the Foreign Exchange.