Monetary policy should deal with price distortions: Business

14 Feb, 2019 - 00:02 0 Views
Monetary policy should deal with price distortions: Business Mr Joseph Gunda

The Chronicle

Oliver Kazunga, Senior Business Reporter

THE forthcoming Monetary Policy Statement should address the wanton price increases on the market and restore financial stability to protect consumer savings and foster economic growth, business leaders have said.

With Reserve Bank of Zimbabwe (RBZ) Governor Dr John Mangudya expected to present this year’s Monetary Policy Statement anytime soon, there is a public outcry over unjustified price increases largely fuelled by distortions in the parallel market exchange rates. 

In separate interviews, representative of business organisations called on monetary authorities to restore confidence across the macro-economic environment.

Professional Business Association of Zimbabwe (Probaz) director Dr Lucky Mlilo said as an association they expected the monetary policy to proffer solutions to prices that have been going up.

“We expect measures that will create financial stability in the economy. There is still need for confidence building in the banking sector,” he said. 

“Fears of FCAs being raided need to be allayed. The black market for foreign currency continues to exist and something needs to be done to normalise the situation.”

Dr Mlilo also said there was a need for the Central Bank to avail a substantial credit facility that would be used in procuring essential commodities like fuel, electricity, wheat and raw materials for the manufacturing of cooking oil, packaging and key products. 

This, he said, would assist to keep prices low. 

“A financial system is a closely interlinked system of financial relationships based genuinely on confidence and trust by all participants in the economy,” he said. 

“Banks are usually a measure of economic growth in the economy. The stability of banks has a positive correlation to the economic growth of a country.”

Dr Mlilo said the inability of some banking institutions to meet RBZ regulatory deadlines was as a result of imprudent lending practices, poor controls and risk management and bad corporate governance principles. 

Confederation of Zimbabwe Industries (CZI) Matabeleland Chapter president Mr Joseph Gunda said their members were of the view that banks should be allowed to lead the process of accessing foreign currency.

As such, he said, industrialists were looking forward to seeing the country discontinue pegging the bond note at an exchange rate of 1:1 against the US dollar and let it float freely on the market.

“The bond notes should either be declared as local currency or we introduce a local currency, discontinue 1:1 rate and let the exchange rate between the bond and US dollar float,” said Mr Gunda.

“Also the Reserve Bank should liberalise the trading of currency through the banks. The RTGS platform should also be operationalised to move currency in domestic FCAs.”

He said businesses were keenly awaiting the removal of the bond note from the market as it was causing price distortions. 

If removed from the market, he suggested that the country could join the Rand Monetary Union or introduce its own currency.

Zimbabwe National Chamber of Commerce (ZNCC) chairman Mr Godwin Muoni echoed similar sentiments adding that the upcoming monetary policy statement should largely focus on addressing pricing distortions presently obtaining in the economy as well as resolving the currency issue. 

— @okazunga.

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