A total of US$ 1.5 billion was traded on the interbank foreign exchange market during its initial 11 month period to 31 December 2019, the Reserve Bank of Zimbabwe has said.
The interbank market was introduced late February last year as a mechanism to formalize illicit foreign exchange activities on the black market.
In an update on the meeting by the Monetary Policy Committee (MPC) which took place midweek, RBZ Governor, Dr John Mangudya said, “The Committee noted with satisfaction that as at 31st December 2019, an aggregate amount of US$1.5 billion had been traded on the interbank market,”
“The MPC agreed that the Bank should set aside appropriate foreign exchange resources to intervene and stabilize the market, as may be required once the enhanced interbank market become fully operational in the near future,” Mangudya added.
As part of the envisioned plan, the RBZ in February last year went on to register more bureau de changes to further liberalize trading of activities via formal channels.
“MPC also resolved to strengthen the operations of bureaux de change by further liberalizing their trading activities under a framework to be supervised by the Bank,” the Governor said.
However, since its inception last year, the interbank market has often been criticized for its lack of transparency regarding failure to present actual entities that sell and those that successfully bid on the platform, a case that has raised skepticism over the process.
To address some of the challenges on the market, monetary authorities have agreed to launch an electronic market tracker under the Reuters system which went on trial on the 2nd of December last year in order to enhance transparency.
“The MPC is pleased to note that the electronic deal tracker system under the Reuters platform went live on a trial basis on 2 December 2019. The main aim of the framework is to improve the operation and efficiency of the foreign exchange market through a more transparent price discovery process set by market makers,”
“This system marks a significant step towards further liberalization of foreign currency trading and is in support of the move towards the complete liberalization of the current account, including the sourcing of funds for the importation of strategic commodities,” Mangudya stated.
The interbank has however not managed to attract sufficient foreign currency offers to meet the growing demand for foreign currency from local companies.
This has left many companies struggle to raise foreign currency on the platform and hence end up sourcing from the parallel market, a development that has exerted exchange rate pressures on the economy.