IMF Urges Zimbabwe Gov to end its quasi-fiscal operations and gold coin issuance
Zimbabwe's government has been urged to end its quasi-fiscal operations and liberalize its foreign exchange market by the International Monetary Fund (IMF).
On October 26, the IMF reiterated its opposition to gold tokens introduced by Zimbabwe in July 2022 to mop up excess liquidity in a report released following meetings the funder held with Zimbabwean officials between October 18 and 25.
As a first step, the IMF stressed the importance of addressing the RBZ's quasi-fiscal operations (QFOs) comprehensively to mitigate liquidity pressures and re-anchor inflation expectations.
To mop up excess liquidity, the RBZ should use appropriate interest-bearing instruments and these measures."
According to the IMF, the central bank should focus on the monetary side of the economy and leave QFOs to the Treasury Department. The question is: Will Zimbabwe listen?
Digital gold coins were added to the physical tokens in May 2023 by the Reserve Bank of Zimbabwe (RBZ) as an alternative store of value beyond the greenback in addition to mopping up excess money.
As soon as the tokens were launched, the IMF opposed their issuance. In its October 25 release, the IMF urged the government to derestrict the exchange rate as well.
A third reason to accelerate the FX market reforms is the need to allow more flexibility in the official exchange rate through more transparent and market-driven price discovery, removing restrictions on the exchange rate at which banks, authorized dealers, and businesses can trade and further reducing export surrender requirements," said the IMF.
