The formal RTGS$ rate to the US dollar will converge with the parallel market rate in the short term and halt the inflationary pressure being exerted on the economy, according to Industry and Commerce Minister Mangaliso Ndlovu.
The interbank rate opened on February 22 at a rate of 1: 2.5, but has since moved to 3 against the US dollar and indications are it will continue to surge in the positive, while the unofficial rate is in the region of 1:4.2 in favour of the green-back.
Minister Ndlovu made the remarks yesterday when he met business member organisations for a post first quarter review meeting on the state of the economy.
The meeting also dwelt on the effects of the 2019 Monetary Policy Statement issued by Reserve Bank of Zimbabwe Governor Dr John Mangudya on February 20 and the impact it has had on the business environment.
Minister Ndlovu said the deliberations had noted that the recent price hikes that are being witnessed are a result of the mismatch between the official RTGS$ rate to the US dollar compared to what obtains on the parallel market.
Monetary authorities dumped the “one as to one” rate between the RTGS$ and the US dollar in February after industry complained the mismatch was resulting in foreign currency earners channelling their earnings to the informal market which had higher premiums.
Despite leaving the determination of the rate to the market, the official rate is still lagging behind the parallel market offers.
“We also did our own review of the Monetary Policy and events. . . there is still concern of the gap between the (official) exchange rate and the parallel market rate and we want to see the convergence of the two,” said Minister Ndlovu.
“You would recall that in the first few weeks after the monetary policy statement, we saw the stabilisation in prices, some products actually went down but in the last two weeks or so we have seen prices also beginning to go up.
“Largely it’s in response to the parallel market exchange rate. We have seen also that the formal exchange rate went up from 2,5 (per US$1) to (just above) 3 which is a positive development.
“We hope that in the near future there will be convergence because this is the main source of the inflationary prices,” he said.
Minister Ndlovu said Government will continue engaging the private sector as a key pillar to finding solutions to problems afflicting the economy.