IMF advises Zimbabwe to further liberalise the currency market, end gold coin issuance

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The International Monetary Fund (IMF) has urged Zimbabwe’s government to end the central bank’s quasi-fiscal operations (QFOs) and fully liberalise the foreign currency market.

Citing a report that the IMF released after meetings it had with Zimbabwean officials from October 18 to 25, NewsDay wrote on October 26 that the funder reiterated its opposition to gold tokens the republic introduced in July 2022 to mop up excess liquidity.

“First, comprehensively addressing the RBZ’s quasi-fiscal operations (QFOs) remains imperative to mitigate liquidity pressures and thus re-anchor inflation expectations,” the IMF said.

“These measures should be complemented with an enhanced liquidity management framework, including through the use of appropriate interest-bearing instruments by the RBZ to mop up excess liquidity.”

The IMF said the central bank must focus on the monetary side of the economy and leave the QFOs to treasury.

In May 2023, the Reserve Bank of Zimbabwe (RBZ) added digital gold coins to the physical tokens to, in addition to mopping up excess money in the economy, provide an alternative store of value beyond the greenback.

The IMF has opposed the issuance of the tokens since their launch and in its October 25 release, implored the government to derestrict the exchange rate as well.

“Third, there is an urgent need to accelerate the FX market reform, by allowing more flexibility in the official exchange rate through a more transparent and market-driven price discovery; removing the restrictions on the exchange rate at which banks, authorised dealers, and businesses can transact; and further minimising export surrender requirements,” the IMF said