While most of the countries in the world see their exchange rates
fluctuate and be determined by the supply and demand of their local currency (when
the currency is not paired to a major one such as the USD or the EUR) , the DRC
Central Bank has its own a unique way to determine its daily official exchange
rate.
It is estimated that 80% of Forex transactions are done in the Congolese
black market, affectionately nicknamed ‘Wall Street’! Therefore, every morning,
a typical trader will call the most important dealers in Wall Street to assess
the real supply and demand and set the exchange rate of the day (yes the rate
is set up once a day!!!) for his bank.
At the end of each day, the Central Bank (CB) is calling each bank to
request for the volume of transactions done during the day and the related
exchange rates. It is worth nothing that the CB has absolutely no mean to
control the figures given by the traders!!! Then, the CB is computing the
weighted average rate and issue the official exchange rate of the day (at the
end of the day!!!).
As a result, the Congolese official exchange rate is derived from the
street…
In the past the Central Bank has accused ‘Wall Street’ dealers to be at
the origin of the CDF volatility. The dealers’ answer was scathing: they (the
CB) should stop printing money and they will see the difference instead of blaming
us…
3 comments:
i like the ''cambiste'' comment to the reserve bank..loool, stop printing money...looool...basic monetary eco 101
What a mess. And who gives banks the daily FX rate? They also decide on their own?
Commercial banks determine their rates based on the supply and demand on the black market essentially because the majority of Forex flows are happening there. The volume in the official circuit is very small…
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