News24.com | Zim currency woes a result of non-monetary factors: RBZ

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The Reserve
Bank of Zimbabwe (RBZ) has blamed the country’s currency tumble on
non-monetary factors despite statistics revealing that reserve money grew by as
much as 307% year-on-year.

The RBZ on
Monday released monetary statistics showing that reserve money had grown to
Z$13,4 billion by the second week of June 2020, a 300% growth from just above
Z$3 billion in June 2019.

Between
February and March, reserve money grew by as much as 24% and this coincided
with a currency tumble, with the Zimbabwe dollar depreciating
to 70:1 to the US dollar from 23:1 in January.

Despite the evident money supply growth against limited foreign
currency supplies, the RBZ has blamed the Zimbabwe dollar’s loss of
value on “non-monetary factors such as negative perceptions, adverse
expectations, and speculative tendencies of economic agents.”

The
depreciation was divorced from economic fundamentals, it said.

The central
bank said price determination in the economy is being established on the basis
of expectations about the depreciation of the exchange rate and prices that
will exist in the future.

“This forward
pricing system or practice of front-loading anticipated exchange rates in the
current prices based on fear factor, is detrimental to the economy, as it leads
to self-fulfilling depreciation in the exchange rate, with negative knock-on
effects on prices,” reads part of the statement.

Meanwhile the
Financial Intelligence Unit, housed under the central bank said Monday, it will
cause the arrest of any person or mobile phone used to advertise illegal
foreign currency activities.

“The FIU, in
collaboration with the police, banks, mobile money / mobile phone service
providers and relevant regulatory agencies, has embarked on an exercise to
identify and take action against individuals who create, advertise on or
participate (actively or passively) in WhatsApp groups or other platforms for
illegal foreign currency trading.”

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