Interbank market rate has changed, what does that mean for fuel price?

The Reserve Bank of Zimbabwe has announced the removal of subsidy on the importation of fuel-a warning of a price hike to the commodity.

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The Reserve Bank of Zimbabwe has announced the removal of subsidy on the importation of fuel-a warning of a price hike to the commodity.

In a statement issued Monday, Reserve Bank of Zimbabwe governor, John Mangudya said the procurement of fuel which for long has been on 1:1 basis, will now be at the prevailing interbank market rate.

“The new position is necessary to promote the use of foreign currecy and guard against arbitrage in the country,” read Mangudya’s statement.

For long, the central bank has been buying fuel on behalf of traders at 1:1 rate and this has resulted in the shortage of the commodity and long queues.

Mangudya said the removal of the subsidy would easy pressure on the central bank as the procurement of fuel would be done through banks at a interbank market rate

Mangudya said on top of that, the letters of credit to purchase essentially commodities such as fuel, drugs food stuff will still be issued by the central bank but at a prevailing market rate.

As of yesterday, the interbank market rate was USD$1:RTGS$ 3.35 and at that rate, a litre of fuel was set to go up to over RTGS$ 4.50.