Zimbabwe Government to Stay Out of Currency Market, Ncube Says

HARARE (Capital Markets in Africa) – Zimbabwe has no plans to intervene in the market for what’s effectively a new currency, Finance Minister Mthuli Ncube said.

“Anything that we do in terms of coming into the market is to manage the volatility, but not to intervene,” he told reporters Tuesday after a weekly cabinet meeting in the capital, Harare. “The government is staying out of the market because we are too big — if we go in there, we distort the market.”

The southern African nation started trading of so-called RTGS dollars on Feb. 22, with the initial rate set at 2.5 per U.S. dollar.

The measures come as the government scrambles to end a currency shortage that’s pushed inflation to the highest rate since 2008 and sparked shortages of fuel and bread. The troubles stem from the country abandoning the Zimbabwe dollar in 2009, after a bout of hyperinflation, in favor of the greenback. In 2016, it introduced the bond notes, which aren’t accepted outside the country, to fund rampant spending.

“Our job is to smooth the vagaries of volatility along the way,” the minister said. “There are certain rules we keep finessing such as the amounts for example that could be tendered within the market system.”

Source: Bloomberg Business News