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Zimbabwe's RBZ scraps heavy-handed forex controls

by Staff reporter
5 hrs ago | Views
The Reserve Bank of Zimbabwe (RBZ) has officially abandoned its stringent enforcement of exchange rate controls, marking a significant policy shift aimed at fostering market stability, restoring business confidence, and allowing the Zimbabwe Gold (ZiG) currency to establish itself through genuine market dynamics.

The move, enacted through Statutory Instrument 34 of 2025, repeals earlier regulations that empowered the Financial Intelligence Unit (FIU) and Zimbabwe Republic Police (ZRP) to arrest traders for pricing goods more than 10% above the official exchange rate. These rules had led to arrests, fines, and widespread intimidation, severely undermining business certainty and public trust in Zimbabwe's monetary system.

RBZ Deputy Governor Dr Innocent Matshe confirmed the policy reversal, emphasizing that the central bank will no longer attempt to dictate exchange rates or prices by force.

"We want the market players to drive activity, not the central bank or its agents. The heavy-handedness is gone. You will never see it again," Dr Matshe declared.

Zimbabwe's economy has long suffered from the distortive effects of state-imposed controls, which fuelled parallel market activities and stifled formal business competitiveness. Though initially designed to stabilise the economy, these interventions suppressed natural market forces, creating an unpredictable and often hostile business environment.

The new approach acknowledges that sustainable economic stability depends on allowing supply and demand-not government fiat-to determine currency values.

However, the transition has encountered challenges. Despite the liberalised regime, banks continue to charge foreign currency premiums well above the interbank rate. Dr Matshe expressed frustration but noted such fluctuations are inherent to a market-driven system.

"The central bank has made this happen because we want the market-not us-to determine the rate," he said.

Positive signs of stabilisation are emerging. Retailers like TM Pick n Pay and OK Zimbabwe maintain relatively steady ZiG exchange rates around US$1:ZiG32 and US$1:ZiG31.95, respectively, closely tracking formal market averages and offering predictability to businesses and consumers.

Liquidity remains a critical hurdle. Many companies still struggle to access sufficient foreign and local currency, raising concerns that without improved liquidity, the market-based system may fail to deliver the desired stability.

Dr Matshe remains optimistic, citing narrowing exchange rate premiums as evidence of growing confidence.

"There is enough foreign currency in the country," he asserted, urging businesses to avoid the parallel market, where rates can exceed ZiG37.

"The market economy we seek cannot be created overnight or by the central bank alone," he added.

Since the ZiG's introduction, the RBZ has maintained the currency is backed by tangible reserves including gold and precious metals. Yet public trust is tentative after years of currency collapses and policy inconsistencies.

"There is a deficit of trust and confidence, which explains the premium currently charged by the market," Matshe acknowledged.

Economists generally agree that removing arbitrary exchange rate controls will bring long-term benefits, including enhanced export competitiveness, pricing transparency, and a more efficient formal economy. By fostering predictability, the new regime is expected to attract both domestic and foreign investment.

Nevertheless, liberalisation exposes Zimbabwe to new risks. Without adequate liquidity and strong financial oversight, volatility could persist, harming businesses and pushing consumers toward informal markets.

The RBZ is reportedly developing new monetary tools to deepen the foreign exchange market and balance freedom with macroeconomic stability.

Ultimately, the success of this new policy depends on the central bank's discipline, restraint from excessive money printing, and consistent transparent action to rebuild trust.

The era of coercive exchange rate enforcement is over. Whether Zimbabwe's markets embrace this change with lasting stability remains the crucial test ahead.

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