Zimbabwe abandons controlled exchange rate, adopts “managed float” regime

Zimbabwe has abandoned its strictly controlled foreign exchange rate regime and adopted a managed float” exchange rate regime with immediate effect.

Under the new regime, banks will take a bigger role in the trading of foreign currency, narrowing the gap with the unofficial market by allowing trade on a more transparent platform.

“This platform will allow foreign exchange to be traded freely among banks and permit a true market exchange rate to be determined,” Finance Minister Mthuli Ncube said.

The Reserve Bank of Zimbabwe will play a monitoring role and is reviewing all regulatons covering mobile money platforms.

“While mobile money platforms have made a significant contribution to facilitating trade and payments in the country, they have also become an instrument which is being used by unscrupulous businesses to illegally trade foreign exchange and undermine the economy,” Ncube said.

“The RBZ is, therefore, currently reviewing all the regulations covering such platforms. In particular, it is intended to:

• Place limits on daily bulk payer transactions.
• Ensure compliance with the 2% IMTT on bulk payers.

“Additionally, the daily returns being submitted by the mobile platforms to the Financial Intelligence Unit of the RBZ will be scrutinised very carefully by the Currency Stabilisation Task Force to ensure that all transactions are legitimate and are in accordance with the financial regulations in place.”

The Zimbabwe dollar officially traded at par with the United States dollar until October 2018 but has since fallen to 39:1 using electronic money and 28:1 cash on the black market. It stood at 18:1 on the interbank market.

The volatility of the Zimbabwe dollar has seen prices rocketing as they continue to be pegged on the United States dollar.

Below is the full statement by Mthuli Ncube.

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