RBZ eases foreign exchange rules

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By MacDonald Dzirutwe

ZIMBABWE'S central bank eased foreign exchange rules on Wednesday, allowing commercial banks to set the currency rate to help thwart a thriving parallel black market.

The southern African country is in economic meltdown with official inflation at 165,000 percent, unemployment of more than 80 percent and consumers facing chronic shortages of food, fuel and foreign currency.

Reserve Bank of Zimbabwe Governor Gideon Gono said the country would move away from the current fixed exchange rate to a willing-buyer, willing-seller policy.

"Under this framework, authorised dealers will match sellers and buyers of foreign exchange guided by a pre-determined priority list as set from time to time by the Reserve Bank," he said in a monetary policy speech.

The top priorities would be food and agriculture inputs.

Currently, the official rate is Z$30,000 to the dollar, while the national revenue authority uses a rate of Z$270,000.

It trades as high as Z$190 million on the black market.

John Mangudya, head of the Bankers Association of Zimbabwe: "We (banks) get to set the rate because this is on a willing buyer, willing seller basis."

"If the central bank tries to set the rate then there will be no willing seller," Mangudya said, adding he hoped to meet with the Reserve bank on Friday to get more detail on the new policy.

Gono also announced that the main lending rate would increase to 4,500 percent from 4,000 percent and vowed to tame rocketing inflation.

"We remain committed as ever before to tame this dragon. This dragon cannot be allowed to continue and we will be dealing a decisive blow to its existence," he said, without giving further details.

Zimbabwe's inflation is the highest in the world.

The policy changes come amidst a political crisis over a delay in announcing presidential election results.

Opposition leader Morgan Tsvangirai has said he won the March 29 election outright and accuses President Robert Mugabe of delaying the result to rig victory. - Reuters

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