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RBZ pumps US$32 million into market
27 Oct 2024 at 12:19hrs | Views
The Reserve Bank of Zimbabwe (RBZ) has infused approximately US$32 million into the interbank foreign exchange market over the past three weeks to stabilize the Zimbabwe Gold (ZiG) currency and address imbalances between foreign currency supply and demand. This intervention aligns with increased year-end demand for forex, driven by agricultural and festive season preparations.
In a statement issued on Friday, RBZ Governor Dr. John Mushayavanhu explained, "During the past three weeks of October 2024, the Reserve Bank has injected about US$32 million into the interbank foreign exchange market to smoothen mismatches between supply and demand. Traditionally, the last quarter of the year witnesses increased demand for foreign exchange to meet critical requirements for the summer agricultural season and for preparations for the festive period."
The fourth quarter typically sees an uptick in forex demand as businesses acquire agricultural inputs and stockpile for the holiday season. Dr. Mushayavanhu emphasized that the recent interventions aim to ensure businesses have reliable access to foreign currency through formal channels, mitigating the need to rely on black-market exchanges.
Recent improvements in the "willing-buyer, willing-seller" (WBWS) forex market, he added, follow strategic adjustments made by the Monetary Policy Committee in late September. "Holders of foreign exchange, including exporters, have been selling their foreign currency in exchange for ZiG to fund their tax obligations and other payments denominated in local currency," Mushayavanhu noted.
However, with the conclusion of the tobacco selling season, RBZ observed a slowdown in foreign currency supply, compounded by rising pipeline demand. Over the past three weeks, pipeline demand has averaged around US$15 million. This week alone, pressures to fund the 2024/2025 agricultural season requirements raised pipeline demand to US$25 million, prompting RBZ to step in.
To address this, the central bank held a market-clearing forex sale on October 24, offering US$25 million, though only about US$19 million was taken up due to limited ZiG liquidity among buyers.
This latest intervention has brought RBZ's total participation in the WBWS market to US$50 million for October 2024, underscoring its commitment to stabilizing the forex market and supporting critical sectors of the economy.
In a statement issued on Friday, RBZ Governor Dr. John Mushayavanhu explained, "During the past three weeks of October 2024, the Reserve Bank has injected about US$32 million into the interbank foreign exchange market to smoothen mismatches between supply and demand. Traditionally, the last quarter of the year witnesses increased demand for foreign exchange to meet critical requirements for the summer agricultural season and for preparations for the festive period."
The fourth quarter typically sees an uptick in forex demand as businesses acquire agricultural inputs and stockpile for the holiday season. Dr. Mushayavanhu emphasized that the recent interventions aim to ensure businesses have reliable access to foreign currency through formal channels, mitigating the need to rely on black-market exchanges.
Recent improvements in the "willing-buyer, willing-seller" (WBWS) forex market, he added, follow strategic adjustments made by the Monetary Policy Committee in late September. "Holders of foreign exchange, including exporters, have been selling their foreign currency in exchange for ZiG to fund their tax obligations and other payments denominated in local currency," Mushayavanhu noted.
However, with the conclusion of the tobacco selling season, RBZ observed a slowdown in foreign currency supply, compounded by rising pipeline demand. Over the past three weeks, pipeline demand has averaged around US$15 million. This week alone, pressures to fund the 2024/2025 agricultural season requirements raised pipeline demand to US$25 million, prompting RBZ to step in.
To address this, the central bank held a market-clearing forex sale on October 24, offering US$25 million, though only about US$19 million was taken up due to limited ZiG liquidity among buyers.
This latest intervention has brought RBZ's total participation in the WBWS market to US$50 million for October 2024, underscoring its commitment to stabilizing the forex market and supporting critical sectors of the economy.
Source - The Sunday Mail
