Trade in foreign currency at commercial banks in Zimbabwe following the easing of tight exchange controls has got off to a slow start, according to local reports on Tuesday.
The state-controlled Herald reported that only two commercial banks were on Monday buying foreign currency at rates between Z$75 000 and Z$100 000 to the US dollar.
”Kingdom Bank was buying the US dollar at between 90 000 and 100 000 Zimbabwe dollars depending on the volume of funds while, FBC Bank was quoted at 76 800,” it said.
Previously, commercial banks could only buy foreign currency at rates determined by auctions managed by the central bank. This saw the Zimbabwe dollar pegged at around Z$26 000 to the greenback.
The Herald said other commercial banks were still trading at the old rate of Z$26 000 to the US dollar.
In a bid to end chronic foreign currency shortages, Reserve Bank Governor Gideon Gono last week said exchange rates would no longer be set by the country’s two-year old foreign currency auctions.
He said the new rates would be determined by a ”market-determined rate on the interbank market”.
Under the system, individuals and companies with foreign currency accounts will be allowed to trade their money with banks on the interbank market.
The fixed exchange rate had been blamed for fuelling the black market in foreign currency, and starving official channels of hard currency needed to purchase vital imports for Zimbabwe such as food, fuel and medicines.
Economists have cautiously welcomed the new system, saying it is more in line with the recommendations of the International Monetary Fund (IMF).
However, since the new exchange rate system was introduced on Thursday, little trading appears to be taking place. Several banks are ”awaiting the outcome of meetings held late last week with the Reserve Bank of Zimbabwe”, the paper said.
There are fears here that the exchange rate will not be allowed to float freely.
President Robert Mugabe’s government is wary about some economic reforms that might see prices escalate way beyond the reach of the majority of the country’s 11,6-million people, 80% of whom are estimated to live in poverty.
Zimbabwe has suffered from more than five years of economic decline. Annual inflation is currently estimated at close to 360%, one of the highest rates in the world.
The country, which recently staved off expulsion from the IMF by paying some of its debt arrears, is keen to get back into the good books of the international lender. – Sapa-DPA