Zimbabwe: RBZ recommends use of 'OMO' bills to mop up excess cash in market

The Reserve Bank of Zimbabwe Monetary Policy Committee has recommended the use of Open Market Operations (OMO) bills to mop up excess cash in the market among other measures aimed at curbing parallel market exchange rates.

In a statement, RBZ governor, John Mangudya has said a number of proposals to stabilize the market were underway.

"The committee also urged more active application of the Open Market Operations Bills to deal with any identified excess liquidity balances in the market," he said.

OMO involves processes in which a central bank mops up excess cash by either buying or selling government bonds in the open market.

Mangudya said the MPC welcomed the RBZ decision to introduce higher denominated banknotes to the market through normal banking channels that are money supply neutral but urged the bank to enhance the process of dealing with and replacing soiled damaged notes in circulation.

"The Committee noted and appreciated the new cash withdrawal limit of 1000 dollars by business entities would need to be closely monitored to avoid abuse," he said.

However, the committee expressed its concerns over the continued deterioration in the exchange rates that were widely being used by the private sector and welcomed the action taken by the bank to curb speculative trading in foreign exchange using electronic banking platforms.