Positive response to interbank forex market

Positive response to interbank forex market
Published: 16 June 2019 (140 Views)
THE Reserve Bank of Zimbabwe (RBZ) says the interbank market has, as at June 13, handled about US$154,7 million, with voluntary sales contributing the largest amount.

Giving his presentation during the ZimTrade exporters' breakfast meeting held in Bulawayo last week, RBZ deputy director (exports) Tayengwa Chitauro said as at June 13, 2019, cumulative interbank foreign payments amounted to US$154,7 million.

He said cumulative interbank sales amounted to US$27 million while voluntary sales amounted to US$25,1 million.

Corporates contributed US$22,2 million, non-governmental organisations and embassies US$2,3 million, individuals US$607,451 and compulsory sales amounted to US$1,9 million.

"So you can see that most of the interbank liquidity is actually coming from voluntary sales. People are actually responding to the interbank positively," Chitauro said.

The interbank started trading at a mid-rate of 1US$:2,5 RTGS$ and a margin of 2,5% was applied either way.

The rate has been gradually increasing closing at the mid-rate of 1US$: RTGS$5,9 as at June 13, 2019, he said.

In terms of the interbank market payments, manufacturing inputs accounted for 39%, services 18%, manufactured goods 17%, energy 13%, education 5%, agriculture 3%, mining and medical 2%, and individuals 1%.

Another apex bank official, one F Masendu, said the seed capital which was injected by the central bank could not sustain the foreign exchange market due to low foreign currency receipts against the backdrop of huge pipeline payments.

"Moreover, moral hazard issues and trading outside the formal market under the twinning arrangements have been some of the challenges affecting the smooth operations of the interbank foreign exchange market," he said.

He said the central bank then fine-tuned the trading rules on the interbank foreign exchange market to ensure allocative efficiency by directing authorised dealers to ensure trading of foreign currency on a willing seller/ willing-buyer basis.

"If this measure is fully implemented, it would result in the unification of exchange rates and completely eliminate or reduce trading of foreign currency on the parallel market," he said.

"Activity on the interbank foreign exchange market is picking up consistent with growing exports and other foreign currency receipts," Masendu said.

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