By Wongani MKandawire
Dr. Paul Gadama’s recent statements highlighted the pressing issue of foreign exchange shortages and the need for bold policy decisions. Forex prices are determined by supply and demand forces, but regulatory frameworks and exchange rate regimes can hinder the rate’s response to market dynamics.
In many countries, central banks play a crucial role in managing economic fluctuations and achieving price stability through monetary policy. However, resolving forex shortages requires addressing the supply side and correcting misalignments through market-driven solutions. The regulated forex market and exchange rate regime can limit the rate’s response to supply and demand mismatches.
Addressing the supply side is essential to resolving forex shortages. Correcting misalignments requires market-driven solutions rather than relying solely on central bank intervention. Central banks must make bold decisions to address forex shortages, achievable within a day, according to Dr. Gadama.
Central banks promote financial stability and contain systemic risks through effective monetary policy and macroprudential policy frameworks. By adopting these frameworks, they can promote economic stability and growth. Resolving forex shortages requires addressing regulatory frameworks, supply-side issues, and market dynamics.
Central banks must take bold action to correct misalignments and promote economic stability. As Dr. Gadama emphasizes, it’s all about policies – and the time to act is now. With bold decision-making, central banks can resolve forex shortages and steer economies towards stability and growth.
