The International Monetary Fund (IMF) has advised the Zimbabwean government to tackle its ongoing currency challenges, including the elimination of a 10% trading margin on domestic transactions, to alleviate exchange restrictions and economic distortions. During a press briefing in Harare, Wojciech Maliszewski, leading an IMF staff team, highlighted the urgent need for currency reform to achieve macroeconomic stability in Zimbabwe.
The IMF’s concerns stem from the rapid depreciation of the exchange rate starting in December, which has significantly inflated the prices of basic commodities in Zimbabwean dollar terms. “The exchange rate distortions need to be addressed. Restrictions like the 10% incentive margin for forex trading and a pricing cap of 10% on the official exchange rate are seen as distortions to the exchange rate,” Maliszewski stated.
The IMF recommends several measures to liberalize the foreign exchange market, including the removal of the 10% marginal cap on exchange pricing relative to the official exchange rate. Additionally, Maliszewski underscored the importance of establishing a new monetary and exchange rate framework to support the goal of macroeconomic stability.
“This mission marks the beginning of our staff-monitored programme, designed not by us, but by the authorities of Zimbabwe, aiming to stabilize the macroeconomy. We stand as advisors to this program, offering guidance towards restoring macroeconomic stability, a critical component of a robust economy,” Maliszewski elaborated.
The discussions also ventured into the Reserve Bank of Zimbabwe’s (RBZ) recent obligation transfers to the Treasury and proposed changes in the forex exchange rate market and monetary policy. The IMF stressed the necessity of ensuring adequate resources to cover these obligations without further triggering inflation.
A key recommendation from the IMF team was for the RBZ to adhere strictly to its mandate and maintain transparency in its operations to secure economic and price stability. “The RBZ needs to focus on its core functions and mandate to maintain price stability and economic stability, ensuring transparency in all operations,” Maliszewski added.
Furthermore, the IMF suggested that new policies should be enshrined in law, raising the possibility of amending the RBZ Act. “Credibility cannot be legislated, but it’s hoped that these changes will bolster confidence in the policy programme and restore stability,” Maliszewski concluded.
The IMF’s visit to Zimbabwe was part of discussions surrounding the country’s request for a staff-monitored programme and the commencement of the 2024 Article IV consultation.
