The government is set to unveil new interventions, which may include reforming the foreign currency auction system and boosting the supply of foreign currencies in the market, to deal with the recent volatility that has affected the Zimbabwean dollar.
The recent weakness of the local currency is attributed to speculative behavior and scarcity of hard currency in the market during this “high demand season.”
In general, there is high demand for foreign currencies during the first months of the year due to a mismatch between increasing demand for imports and lower foreign exchange inflows into the market. Economy.
The Zimbabwean dollar has lost a significant amount of strength against the United States dollar over the past three weeks.
In the parallel market, the exchange rate fell from US$1:9,800 during the last week of December to US$1:13,000 last week.
On the official market, the price reached US$1:5903 on December 29 and has since fallen to US$1:8331.
Mtwalli Ncube told the Sunday Mail that the government would implement fiscal and monetary policy interventions to arrest further decline in the local unit.
“Currency fluctuations are caused by speculative behavior in the market and shortage of foreign exchange during the high demand season,” he said.
“The government will take further fiscal and monetary policy measures, which may include redesigning auctions in order to deal with volatility.
He added: “The government will also increase the supply of foreign currencies at a time when demand for them is high.”
Minister Ncube said the government would take measures to deal with the recent currency fluctuations “with the aim of reducing their impact on domestic inflation and general price increases.”
Economist Dr Kingston Kanell said the government must manage the money supply.
He added: “There is a need for fiscal discipline and for the government to manage the money supply and remain committed to spending the budget.”
“Although it may be difficult to stay within budget given weak commodity prices and climate change, it is important that the government commits to fiscal discipline.”
When presenting the 2024 national budget last year, Professor Ncube said the government would continue to entrench measures that promote currency stability.
“Fiscal restraint, coupled with the healthy current account situation, provides the necessary conditions for currency and price stability,” he said.
“In this regard, in order to effectively manage liquidity in the economy, the Central Bank’s Monetary Policy Committee is expected to continue implementing policies that maintain non-inflationary liquidity of the local currency and a stable exchange rate.
“Specifically, the central bank will target a monthly inflation rate below 3% throughout 2024.” Sunday mail
