By Alois Vinga
THE Reserve Bank of Zimbabwe Monetary Policy Committee has recommended the use of Open Market Operations (OMO) bills to mop up excess cash in the market among other measures aimed at curbing parallel market exchange rates.
In statement, RBZ governor John Mangudya said a number of proposals to stabilise the market were underway.
“The committee also urged more active application of the Open Market Operations Bills to deal with any identified excess liquidity balances in the market,” he said.
OMO involves processes in which a central bank mops up excess cash by either buying or selling government bonds in the open market.
The overall objective is to clear off the surplus money and indirectly contract money supply and starve the parallel market of excess cash for dealers to offer higher rates.
Mangudya said the MPC welcomed the RBZ decision to introduce higher denominated bank notes to the market through normal banking channels that are money supply neutral but urged the bank to enhance the process of dealing with and replacing soiled damaged notes in circulation.
“The Committee noted and appreciated the new cash withdrawal limit of $1000 by business entities would need to be closely monitored to avoid abuse,” he said.
However, the committee expressed its concerns over the continued deterioration in the exchange rates that were widely being used by the private sector and welcomed action taken by the bank to curb speculative trading in foreign exchange using electronic banking platforms.
This came after the central bank has directed mobile money platforms to limit the volume of transactions flowing into their systems alongside other measures to which include the capturing of clients’ identity details for all agent lines holders.
The ZIMSWITCH platform was also ordered to reduce the quantum of transactions that can be carried out in a day while similar measures have been applied on inter-bank transfers.
“As part of efforts to assist in the recovery and growth of the productive sectors of the economy and to help with post Covid-19 recovery, it was resolved there was need to avail more financial resources for the productive sectors of the economy by banks,” Mangudya added.