The Zimbabwean Case Of The Special Drawing Rights, And The Forex Auction System

Throwing money at the backlog will not eradicate the artificially high demand. If anything, it will exacerbate it By Paison Tazvivinga The new dispensation, through monetary and fiscal authorities, is pursuing multiple objectives chief among them employment creation, stable prices, a stable foreign exchange rate and moderate long-term interest rates. Of late the main emphasis has been on inflation reduction and foreign exchange stability. The proof thereof lies in the continued decline in annual inflation which stood at 837.5 percent in July 2020, 106.6 in June 2021 and 50.2 percent in August 2021 and a relatively stable foreign exchange rate hovering around ZWL86 to USD1. To tame inflation, authorities have been pursuing a tight monetary policy to regulate money supply through maintaining the reserve target at 20 percent according to the recent Monetary Policy Committee resolutions of 27 August 2021. The bank policy rate at 40 percent per annum has also contributed to the inflation curbing endeavour. In a bid to regularise foreign currency availability and distribution, a Dutch auction system was introduced on 23rd June 2020.