Reserve Bank of Zimbabwe governor John Mangudya says the central bank has increased the foreign currency injections into the economy by 50% to $150 million a month to ease forex shortages.
This came amid reports that the exchange rate for the US dollar had hit the 100% mark on the parallel market.
Mangudya told NewsDay Business on Friday that the cash barons fuelling the parallel market would soon find themselves out of business as the central bank had moved to flood the market with foreign currency.
“The Reserve Bank has injected more cash into the banking sector, therefore, those people who are selling cash at 100% would soon count their losses. If they are being encouraged by politicking, they are going to lose money. This week alone (last week) we have injected $25 million and next week (this week) we are putting $30 million, so this month we are saying we have increased it from $100 million to $150 million, therefore there is no logic for prices to go up when there is more money in the economy,” he said.
“Bond notes in the market right now is about $390 million… Whenever we release money like what we are doing, some of the money remains in the banks and some of the money is captured by people in circulation. So when we talk about money, do not look at the money at the banks only, talk about the money in the economy — that is more important. Not money in the vault (bank vaults).
“In this economy, there is more than $2,5 billion in circulation, cash, then you now add money at the banks which is about $500 million. Bond, as I said is $390 million, but if you go to the banks they will tell you they have got $20 million with them which means the money is in the market which is why people then sell money,” Mangudya said.
He said the parallel market was a cash baron-driven business who send their dealers to the streets as they were taking advantage of politicians.
This comes as the bank queues still persist with depositors failing to get cash, creating demand for the greenback.
“We have cash at the banks. Right now, as we speak, my staff has been discharging funds, giving cash to the banks. So those ones who are selling at those high rates are going to lose money. They are going to fail to find money because there are no fundamentals to warrant the parallel rates to go to 100%,” he said.
This shows banks are deliberately holding onto cash. Bankers Association of Zimbabwe vice-president Benefit Washaya recently hinted that they were considering not disbursing cash to depositors.