Zimpapers Logo

RESERVE Bank of Zimbabwe Governor Dr John Mangudya today presents his Monetary Policy Statement amid market expectations he will come up with a cocktail of measures to address currency challenges dogging the economy. The statement will also address prices that have been going up and measures to create financial stability in the economy.

There has been a flight of capital from the country and this has precipitated a severe shortage of United States dollars – fuelling distortions in the US$: bond rate. While the official rate remains at US$1 – 1 bond note, the reality on the ground is that the rate is almost double that and illegal foreign currency traders are cashing in.

Most companies require forex to oil their operations and are resorting to the parallel market where the greenback is readily available. Due to rising demand, the rate is constantly changing and companies are finding it hard to stay afloat. Currency fluctuations also make it virtually impossible to price commodities competitively hence the failure by some businesses to restock.

On a broader macro-economic level, the country is not generating enough foreign currency from exports to satisfy demand and this has seen the RBZ grappling to spread the little forex in its reserves across competing demands from fuel dealers, food imports, health sector and other critical areas. It’s a Herculean task for Dr Mangudya and his team but that one that has to be executed meticulously for the economic well-being of the nation.

In an interview yesterday, Dr Mangudya said it was meant to deal with all the various challenges facing the economy. “The monetary policy statement will be issued tomorrow (today) and is aimed at addressing price and financial stability in the economy,” he said.

“As you know, our responsibility as defined in the RBZ Act is to ensure price and financial stability, so that is what we will be addressing in the statement.” Dr Mangudya said the RBZ would also address the foreign currency shortages that has seen the emergence of a parallel market for the green back.

The country is facing foreign currency shortages that have resulted in prices of basic commodities rising as companies struggle to raise money for the purchase of equipment and essential raw materials. “We also need to deal with the foreign currency issue,” said Dr Mangudya. “As you know demand for foreign currency is outstripping supply and it is a challenge that we have to address.”

Of late, there have been intermittent fuel shortages wrought by panic on the market. While Government has been facilitating the importation of the commodity by prioritising fuel imports ahead of everything else, garages have been running dry because motorists are buying and hoarding fuel due to fear of the unknown.

Clearly, Zimbabweans have not gone past the speculative tendencies of the 2008 era where parallel market rates went haywire and the economy virtually imploded. These and other challenges bedevilling the economy need to be addressed fast. The statement must pronounce itself unequivocally on the currency situation in a manner which will calm an anxious market.

The RBZ Governor has just returned from a highly successful trip to the United Nations General Assembly where he was part of President Emmerson Mnangagwa’s delegation. In New York, alongside Finance and Economic Development Minister Professor Mthuli Ncube, he met fund managers, investment bankers, stock brokers from the New York Exchange, billionaires from the US and other movers and shakers in the world’s financial capital.

During their interactions where they were pitching the President’s Zimbabwe is Open for Business mantra, the Central bank boss must have gleaned some ideas on how to manage the country’s monetary policy. Crucially, he must have picked up on the important issues prospective investors want addressed before they commit their capital into Zimbabwe.

President Mnangagwa and Prof Ncube have already said the bond note will continue to be used as legal tender for now, at least until all the fundamentals are in place for a local currency to be introduced. Dr Mangudya’s statement must contain measures to stabilise the bond note while incentivising exporters to bring in much needed foreign currency. It must also dangle a carrot to foreign investors who need assurances that their money is safe in Zimbabwe and they can access it as and when they deem necessary.

The President has already covered a lot of ground in this area and acquitted himself well when he met international investors in New York.

Dr Mangudya must also address the concerns of local industry. Most firms are struggling to raise their capacity utilisation beyond 50 percent due to lack of capital to acquire new and modern machinery. They can’t compete with cheap imports because of high costs of production.

They need to be supported to produce more and export so that they generate foreign currency for the country. While we accept that the cake is too small to share equitably, critical sectors of the economy such as the manufacturing industry need to be capacitated fully.

Mining also needs consideration with small scale gold miners deserving RBZ support to mechanise and increase productivity. After all, they contribute more than the established big mines to Fidelity Printers. The RBZ needs to ensure that their payments are done promptly so that they are not tempted to smuggle the yellow metal out of the country.