Deal with currency issue, IMF tells Zim
THE International Monetary Fund (IMF) has implored the government to remove the 10% trading margin on domestic transactions, saying the policy was causing exchange restrictions and distortions.
Speaking to the Press in Harare yesterday, the IMF staff team led by Wojciech Maliszewski asked the government and Treasury to focus on addressing the currency issue to restore macroeconomic stability.
“We have been extremely concerned about the exchange rate depreciation which began in December and then began to become rapid which led to the substantial increase in prices of basic commodities in Zimbabwe dollar (terms),” Maliszewski said.
“The thing that needs to be addressed is the exchange rate distortions. There are some restrictions like the 10% incentive margin forex trading. There is a pricing cap of 10% on the official exchange rate which we see as an exchange rate distortion.
“There is a need for the government and Treasury to focus on addressing the currency issues to restore macroeconomic stability.”
He added: “Some steps need to be taken to make sure of foreign exchange liberalisation for example the removal of the 10% marginal cap on the exchange pricing concerning the official exchange rate. Some steps need to be taken to make sure that there is a new monetary and exchange rate framework that promotes the goal of macroeconomic stability.”
Maliszewski emphasised the IMF team’s eagerness to help the country to achieve macroeconomic stability.
“This mission is a combined mission at the beginning of our staff-monitored programme. The programme is not our programme, but it’s the programme of the authorities of Zimbabwe as it works towards stabilising the macroeconomy,” he said.
“We are just advisors in this programme. We will be as helpful as possible in advising the government to restore macroeconomic stability which we consider as a very important factor of a robust economy.”
He said resources were needed to facilitate the transfer of some of Reserve Bank of Zimbabwe (RBZ) obligations to Treasury, and not trigger inflation further.
“The key findings of the economic development side and in terms of policies we discussed with the Finance ministry and the Reserve Bank of Zimbabwe is to restore currency stability. To this end, we discussed the recent transfer of the RBZ obligation to scale its operations to the Treasury,” he said.
“We also discussed steps towards liberalising the forex exchange rate market and the potential changes in the exchange rate and monetary policy. At this point, there is a need to make sure that there are enough resources to cover these obligations and make sure that they do not cause any additional inflation.”
He said RBZ needed to stick to its mandate and be transparent in its operations to successfully tie down the economy and price stability.
“Another issue that we noted is that the RBZ needs to stick to its obligations and its core function and mandate to maintain price stability and economic stability. We need to make sure that this is the case by making sure that all operations are transparent,” he said.
“Another thing is that we need to make sure that the new policies that may be put in place are embedded in the law. There is a need to discuss whether the RBZ Act needs to be changed.
“The governor rightly mentioned that its credibility cannot be legislated and I fully agree with it. I hope these changes will help to instil more confidence in the policy programme and to make sure that this stability will be restored.”
The IMF team was in Zimbabwe to discuss the authorities’ request for a staff-monitored programme and commence 2024 Article IV consultation.