By Alois Vinga
RESERVE Bank of Zimbabwe (RBZ) has taken steps to strengthen the exchange rate stability by mopping up excess liquidity after committing to clear all backlogs arising from unsettled payments at its auction system.
In an update Friday, RBZ Governor John Mangudya unveiled special market bills which would curtail money supply in the economy.
The RBZ move comes as the central bank is blocking the local currency balances held by corporate companies from flowing into the parallel market. Such huge balances have had the adverse effects of speculatively pushing exchange rates up.
“In order to further tighten money supply in view of recent developments on inflation, the bank has introduced special exchange rate linked corporate open market operations (OMO) bills for the purposes of directly dealing with the growth of money supply in the economy,” he said.
“These bills will be targeted at local corporations with huge local currency as some of these funds are being used to destabilise the foreign exchange market. This measure is to support the stability of the foreign exchange market In line with the MPC Resolutions of August 27, 2021,” he said.
An OMO is issued by the central bank as a liquidity measure through financial institutions by either buying or selling government bonds.
The central bank gives the money as a deposit for a defined period and synchronously takes an eligible asset as collateral.
Mangudya has also moved to end months of strife by foreign exchange auction beneficiaries who have endured a prolonged period before accessing foreign currency.
This is attributable to malpractices by certain entities that were sponsoring multiple bids under the main auction system.
“Thus the main auction allotments for Auction 64 of Tuesday, September 21, 2021, will be fully paid by Monday, October 4, 2021. The bank has ring-fenced the auction allotments backlog which it will continue to expunge separately from current allotments,” he said.
He promised, going forward, all auction backlogs would be cleared within two weeks from the auction date.