The Reserve Bank of Zimbabwe (RBZ) is taking measures to tighten the money supply in the market.
RBZ Governor, Dr John Mangudya indicated in a Friday update that the central bank had unveiled special market bills which would curtail money supply in the economy.
The move comes as the central bank is blocking the local currency balances held by corporate companies from flowing into the parallel market. Such huge balances have had the adverse effects of speculatively pushing exchange rates up. Mangudya said:
In order to further tighten money supply in view of recent developments on inflation, the bank has introduced special exchange rate linked corporate open market operations (OMO) bills for the purposes of directly dealing with the growth of money supply in the economy.
These bills will be targeted at local corporations with huge local currency as some of these funds are being used to destabilise the foreign exchange market. This measure is to support the stability of the foreign exchange market In line with the MPC Resolutions of August 27, 2021.
An OMO is issued by the central bank as a liquidity measure through financial institutions by either buying or selling government bonds.
The central bank gives the money as a deposit for a defined period and takes an eligible asset as collateral.