Zimbabwean central bank scraps subsidized exchange rate for fuel importation to curb arbitrage
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E-mail Xinhua, May 21, 2019
HARARE, May 20 (Xinhua)-- The Reserve Bank of Zimbabwe (RBZ) announced on Monday it had scrapped the 1:1 exchange rate that was being used by oil companies to import fuel in order to curb arbitrage in the industry.
The oil companies had continued to use the subsidized exchange rate after the RBZ introduced the interbank foreign exchange market in February when it discarded the 1:1 exchange rate.
In a statement on Monday, RBZ Governor John Mangudya said all oil companies will from Tuesday, May 21, start to use the interbank exchange rate, currently at around 3.3 bond note to the U.S. dollar, when importing the commodity.
The move comes at a time when the country is facing acute fuel and power shortages due to ongoing foreign currency shortages.
"There shall be only one foreign exchange rate to be used in the market for the importation of all goods and services. This means that the 1:1 exchange rate that was being used by oil marketing companies for the procurement of fuel will be discontinued with immediate effect," the statement read.
He said the new position was necessary to promote the efficient use of foreign exchange and minimize and guard against incidences of arbitrage within the economy.
He said as previously announced, the RBZ was proceeding to make a drawdown of 500 million U.S. dollars from an offshore line of credit to supplement the country's foreign exchange receipts and support the interbank foreign exchange market.
"The facility will be disbursed into the economy through the interbank foreign exchange framework at the prevailing interbank foreign exchange rate on a willing-seller willing-buyer basis," said the statement.
While the interbank exchange rate is at around 3.3 local currency to the U.S. dollar, it is trading at around 5 to the green back on the parallel foreign currency market.
The government also increased fuel prices by more than 100 percent in January, triggering protests that resulted in the death of 12 people and destruction of property. Enditem
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