HARARE – Zimbabwe’s currency reform which resulted in the conversion of bond notes and all electronic money into a currency called the RTGS dollar, will mitigate the current economic woes, characterised by acute shortages of foreign currency and inflationary pressures, the International Monetary Fund (IMF) has said.
Last month, the central bank established an Interbank Foreign Currency Exchange meant to formalise forex exchange among banks and the Bureau de Changes. Government then pegged the RTGS dollar at 1:2.5 during the debutant floating of the local currency. The RTGS dollar is now part of the multi-currency basket in the southern African nation.
Responding to questions on Zimbabwe during a media briefing yesterday, IMF Communications Director Gerry Rice said little progress has been made towards addressing the fundamentals.
“And our initial evaluation of that which has been announced by the Zimbabwean authorities recently is that it’s a step in the right direction to address distortions that have significantly impaired those macroeconomic outcomes that I’ve mentioned,” he said.
Today, banks are trading the RGTS at 2.51 to the U.S. dollar. On the black market, one US dollar still costs around 3.5 bond notes and at least $4 in electronic funds.
“Of course, the currency reforms’ success will depend on the implementation of an effective overall monetary policy framework supported by market-determined interest and exchange rates, together with prudent fiscal policies.”
Rice admitted that the southern African nation is still facing a major set of challenges.
“The IMF is trying to help. We’re engaged with them on how we can help them as much as possible,” he said.
The country is still finding ways to clear $2 billion worth of arrears to lenders such as the African Development Bank (AfDB) and the World Bank (WB). However, Rice said the discussions are still ongoing so that the country can be revived economically.
“As you know …well, maybe people don’t know…but the Fund does not have a financing program with Zimbabwe, though we continue to have discussions with the authorities to assist them in implementing the reforms contained in their Transitional Stabilization Program (TSP),” he said.
Recently, Finance Minister Mthuli Ncube met with the Bretton Woods Institution’s managing director of Christine Lagarde on the economic developments and the reforms made so far, in a bid to secure a funding to clear the southern African country’s debts.
“…is a wide ranging stabilization and reform program aimed at addressing what is clearly a deep macroeconomic imbalance challenge as well as a broader set of social and economic challenges”
Rice added that the country still needs to clear its arrears to other international financial institutions and financing assurances from bilateral predators and agreement on policies.
“So there’s no financing program with the IMF, but we’re looking to be supportive as we can, and so stay tuned for further developments.”
Previously the IMF warned the government to come up with sound footing policies that are meant to curb the current economic woes. IMF projected that the country’s Gross Domestic Product (GDP) will grow by 3.6% in 2019 while consumer price seen at 3.9%.