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Confederation of Zimbabwe Industries Pushes For Interbank Rate

Confederation of Zimbabwe Industries Pushes For Interbank Rate

The Confederation of Zimbabwe Industries (CZI) has urged the Reserve Bank of Zimbabwe (RBZ) to establish an interbank trading platform for foreign currency that allows demand and supply to determine the exchange rate.

The RBZ currently is running the Dutch foreign currency auction system but confidence in the auction rate is low due to the huge parallel market premium, according to CZI.

In its latest macroeconomic briefing note to members, CZI called on monetary authorities to review the auction system. Part of the note read:

History has also taught us that the exchange rate cannot be legislated into a reference rate on the market, as the market will always set its own rate.

The authorities have two choices; either let the formal market determine the exchange rate using market forces or continue with controlling the formal market while letting the parallel market set the reference rate.

The fear that allowing the auction rate to depreciate will see the parallel market depreciate in turn appears not to be based on evidence, as the market premium has been shrinking with the depreciation of the official exchange rate.

It is, therefore, important that modalities for having a market-determined exchange rate be explored and acted upon, especially the need for an interbank trading platform to emerge where demand and supply of foreign currency will determine the exchange rate, rather than the auction rate being used to dictate terms.

ÔÇŽ The economy needs a reference rate, and this rate can only be determined by market forces rather than legislation.

Last Tuesday, the RBZ set the rate at US$1:ZWL$130, against US$1:$230 on the parallel market.

More: NewsDay

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5 Comments

Jah­čç┐­čç╝Tsvarie-07 5┬ámonths ago

As workers we are suffering and government must see to it that employers are paying accordingly, employers are driving parallel market and paying Rtgs$...


Jah­čç┐­čç╝Tsvarie-07 5┬ámonths ago

As workers we are suffering and government must see to it that employers are paying accordingly, employers are driving parallel market and paying Rtgs$...


VaZhou 5 months ago

I don't think it will work out.
WHY?
The Minister in that respective office doesn't know the current rate. Buy the time he'll know he could be out of that honourable office.


Yvt 5 months ago

In other words CZI is advocating for a free market exchange rate were demand and supply will determine the exchange rate. Ndokuzvipedza rather than have a managed exchange rate, market forces should be used to determine the rate, Mthuli ndopaanoti the market is still looking for a rate kkkkkkk after over a year with his managed exchange rate.


ETIG 5 months ago

I think ­čĄö that's a good idea ­čĺí.



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