Zimbabwe gets new foreign currency trading system

Zimbabwe has introduced a new foreign currency trading regime again as the country battles to contain runaway inflation and an unsteady currency.

The country is facing its worst economic crisis in a decade and is grappling with shortages of basic foods, medicines, fuel, electricity and foreign currency. Unemployment is at nearly 90%. A lack of confidence in the local currency has seen Zimbabwean businesses pegging prices in US dollars even as the central bank maintains that its efforts to move from the multicurrency system have yielded positive results.

In 2019, Zimbabwe reintroduced its local currency after 10 years of using a multicurrency system dominated by the US dollar and the rand. The Zimbabwean dollar is trading at close to 40 to the US dollar from 2.50 when it was introduced.

On Wednesday, finance minister Mthuli Ncube said the new foreign currency trading system would come into effect immediately and be based on the “Reuters system”, which allows foreign currency to be traded freely among banks.

Ncube said the exchangerate volatility had become unsustainable as it was contributing to high inflation. “Zimbabwe has had no transparent and effective foreign-exchange trading platform for a long time. Consequently, official rates have not been effectively determined, while a thriving parallel market has developed.”

Ncube said that under the new system, trading rules for the bureaux de change system would be liberalised so that they could conduct broader transactions. The Reserve Bank of Zimbabwe is expected to be a significant player by feeding funds into the new market, while all the country’s banks have been invited to be part of the market