The Zimbabwean government is preparing to unveil a series of new interventions aimed at addressing the recent turbulence experienced by the nation's currency.
These measures may include revamping the foreign currency auction system and bolstering the supply of foreign currency in the market to counter the recent instability of the Zimbabwean dollar, according to Professor Mthuli Ncube, Zimbabwe's Minister of Finance, Economic Development, and Investment Promotion.
The recent depreciation of the local currency has been attributed to speculative activities and a shortage of hard currency in the market during the so-called "high-demand season." The increased demand for foreign currency in the early months of the year is due to a disparity between increased import needs and diminished inflows of foreign currency into the economy.
"Currency volatility is being caused by speculative behaviour in the market and a shortage of foreign currency during this high-demand season," Ncube told local news outlet The Sunday Mail. "Government will be taking further fiscal and monetary policy measures, which may include auction redesign in order to deal with the volatility. Government will also increase the supply of foreign currency at a time when demand for it is high."
He noted that the Zimbabwean government intends to introduce these measures to mitigate recent currency fluctuations and reduce their impact on domestic inflation and general price escalation.
Commenting on the issue, economist Dr. Kingston Kanyile emphasized the need for the government to exercise fiscal discipline and effectively manage the money supply.
Last year, during the presentation of the 2024 National Budget, Professor Ncube emphasized the government's commitment to reinforcing measures that promote currency stability, noting that fiscal restraint and a strong current account position lay the foundation for currency and price stability.
He outlined the need for effective management of liquidity in the economy and highlighted the central bank's objective of maintaining non-inflationary liquidity in the local currency and a stable exchange rate, with a target of a month-on-month inflation rate of less than 3 percent throughout 2024.