Reserve Bank of Zimbabwe
|Governor||Dr. John Mangudya|
|Central bank of||Zimbabwe|
|Preceded by||Reserve Bank of Rhodesia and Nyasaland|
The Reserve Bank of Zimbabwe (RBZ) is the central bank of Zimbabwe. Its offices are located at number 80 Samora Machel Avenue in Harare. The Reserve Bank of Zimbabwe operates under the Reserve Bank of Zimbabwe Act, Chapter 22: 15 of 1964. The Act provides for the Board of Directors and the post of Governor who is responsible for the day-to-day administration and operations of the Bank. The Governor is assisted by two Deputy Governors.
The RBZ is remodelled more or less similar to the Bank of Rhodesia and Nyasaland which was established as a central bank for the Federation of Rhodesia and Nyasaland (FRN). It thus has its origins to the Central Bank of Rhodesia and Nyasaland. The RBZ was the successor of the Central Currency Board which had the sole prerogative of issuing money and regulating the monetary system of the FRN.
Originally, the RBZ was situated in the then Vincent Building (present day Mapondera Building)and it was later moved to the then Bank of Chambers at 76 Samora Machel Avenue in June 1957. The carrying capacity of this building became under threat due to an increase in the operations of the bank as well as the growth of the staff. This prompted the establishment of another building which had the capacity to encompass all these new changes, which saw the relocation of the bank to number 80 Samora Machael Avenue. This building was officially opened by President Robert Mugabe on 30 May 1996.
Roles and Functions of the RBZ
The RBZ operates in accordance to the dictates of the national constitution. By extension, it is only answerable to the law. It operates under the Reserve Bank Act which mandates it to regulate and or create monetary policies, protect the currency in the interest of balanced and sustainable economic growth as well as regulating the circulation of money. This Act is also remodelled in accordance with the Reserve Bank Act of 1964 which had the same dictates. The Act also stipulates that the RBZ is to be headed by a governor, who is usually appointed by the president on a five year term which is open to an extension.
The governor has the responsibility of governing the day to day operations of the bank as well as issuing monetary statements to keep the nation abreast in as far as the income of the state is concerned as well as its expenditures. The governor is assisted by two deputies and presently they are Dr. Charity Dhliwayo who was elected as an acting governor after the tenure of Dr. Gideon Gono's second term in 2013 and Dr. Kufukile Mlambo. The Act also obliges the bank to have a Board of Directors who usually represent the key sectors of the economy.
The main duty of the RBZ is to present monetary policies with primary objectives that address management of inflation or unemployment, and maintenance of currency exchange rates.
The failures of the RBZ has largely been pinned to have been worse under the stewardship of Gono who was appointed as the central bank's governor from 2003 to 2013. During his tenure, the country's inflation skyrocketed to unprecedented levels. This literary meant the destruction of the local currency, the Zimbabwean Dollar. Gono's predecessor, Dr. Leonard Tsumba whose term expired on 30 June 2003 has been distanced from this RBZ predicament though the Zimbabwean economic crisis dates back prior to the appointment of Gono.
During Gono's tenure, liquid crunch, which is currently affecting most banks became a wide phenomenon. People were obliged to withdraw an amount which was equivalent to US$5 which was inadequate. However, clean uncirculated notes were readily accessible and available at the parallel market, which was also referred to as the black market, something that began to be pinned on what Gono labelled as money launderers.
The central bank was also implicated in devoting itself more in what was referred to as its non-core business such as giving loans to farmers as well as purchasing farming equipment to be distributed to newly resettled farmers. The central government was thus accused of spearheading ZANU PF campaigns.
Zimbabwe would see a world record inflation rate of 231 million percent (official figure as of July 2008) to the extent that the 2008 budget that was presented was for a staggering 66,500,000,000,000,000,000-Zimbabwean dollars (US$3 billion). The budget was presented in both local and US$. As Reserve bank Governor, Gono would thrash zeros from the local currency thrice during his tenure in a bid to curb the ever growing inflation but to no avail. This saw the introduction of new money denominations, some of which had expiry dates. On Jan 29 2009, the acting Minister of Finance, Patrick Chinamasa scrapped the local currency in favour of a multiple currency economy. Currencies adopted at the time would be the American dollar (US$), British pound (£), South African Rand (ZAR) and the Botswana Pula (BWP).
Zimbabwe is currently in hyperinflation as its current year on year inflation rate as of May 2020 was on 785.55% (Zimbabwe Inflation Rates) which makes it the second in world rankings of countries experiencing hyperinflation.
In December 2014, RBZ would introduce a currency of coins backed by a bond to ease transaction change problems. Since the introduction of the multi-currencies in 2009, Zimbabweans were forced to take small items like sweet, cigarettes, ball-point pens, and credit notes as change because of the shortage of US dollar and South African rand coins in the country. The bond coins were denominated in 1 cent, 5 cents, 10 cents and 25 cents. The coins were brought into circulation through the local banks. The coins were minted in South Africa. At the time of introduction, the coins were equivalent to the value of US cents.
Foreign Currency Auction
The Reserve Bank of Zimbabwe (RBZ) replaced the interbank market with weekly foreign exchange auctions to determine the Zimbabwe dollar exchange rate with those in industry and commerce cautiously optimistic that the platform will enhance transparency and efficient distribution of foreign exchange.
The Tuesday auctions are to sell the foreign currency retained by exporters which must either be used or sold within 30 days at the discretion of the exporter or be subject to compulsory sale after 30 days. RBZ governor Dr John Mangudya said the auction system will operate on the Reuters Forex Trading platform, a real-time electronic trading system. The weekly auctions are designed to improve transparency and efficiency in trading of forex in Zimbabwe.
Zimbabwe conducted its first foreign currency auction in years to boost transparency and efficiency in the forex market on 23 June 2020. The Reserve Bank of Zimbabwe (RBZ) had announced that it will discard the 1:25 fixed interbank exchange rate system, which had been in place since February 2020.
The central bank said that the auction system, to be held every Tuesday, was designed to give fair value of the local currency in relation to the U.S. dollar. At the auction system, the Zimbabwe dollar debuted at 57 against 1 U.S. dollar. The new official exchange rate, however, remains below the parallel market rate which is running at between 80 and 95 per U.S. dollar depending on the method of payment.
Results of the auction conducted by the RBZ showed that the highest rate to the greenback on offer was 100 Zimbabwe dollars while the lowest was 25.5 Zimbabwe dollars. Those who want to buy hard currency through the auction system would be expected to present one bid per auction ranging from 50,000 U.S. dollars to 500,000 U.S. dollars.
List of Reserve Bank Governors
- 1980 - 1983 Dr. Desmond Krogh
- 1983 - 1993 Dr. Kombo Moyana
- 1993 - 2003 Dr. Leonard Tsumba
- 2003 - 2013 Dr. Gideon Gono
- 2013–present Dr. John Mangudya
- , History of the Reserve Bank, RBZ, Published: No date Given, Retrieved: 16 June 2014
- ,Reserve Bank of Zimbabwe - The printing machine, Zimbabwe blogspot, Published: 11 Nov 2009, Retrieved: 16 June 2014
- ZIMBABWE'S 2014 BOND COINS, Pindula, Retrieved: 29 January 2015
- Golden Sibanda, , The Herald, Published: 23 June, 2020, Accessed: 24 June, 2020
- , Xinhua Net, Published: 24 June, 2020, Accessed: 24 June, 2020