Farirai Machivenyika, Harare Bureau
The scrapping of the multi-currency regime last month was not made in haste, but was carefully planned as Government had been working on it since last year.
This was revealed by Finance and Economic Development Minister Professor Mthuli Ncube in an interview with a local weekly newspaper.
“We had a fiscal policy that was a risk to monetary policy and to the entire macroeconomic environment, but when I got in, we managed to put the fiscus under control, then I realised that we were walking on one leg,” said Prof Ncube.
“We also need the monetary policy, then we have a complete tool kit to also deal with the macro-economic environment. We have been on the journey towards currency reforms, we just didn’t tell you. We started on October 1 (last year).”
Prof Ncube said Government did not effect the currency reforms in panic, as has been suggested in some quarters given that Statutory Instrument 142 of 2019 came at a time the parallel market rate for foreign currency was going crazy.
“No, this was not a panic move, and so on the 1st of October we separated the accounts as you recall and in January we did a quasi-currency reform in the form of fuel price and of course, the reaction was, I would say interesting and then, on the 20th of February we introduced the interbank market exchange rate and formally abandoned the fixed exchange rate of 1:1 and on 24th June we introduced the domestic currency,” he said.
“We have been on the journey. Maybe the issue is we moved faster on certain things, slower on certain things.”
Prof Ncube said when he was appointed finance minister, he made it clear that the country needed its own currency, adding that his remarks in the media interviews after landing the portfolio were meant to “prepare minds”, but people didn’t believe him.
He was happy that President Mnangagwa was also keen to have a new currency for the country, making his plans easy.
“The President also gave similar signs, but of course you can’t negotiate a day when you introduce a new currency, you do it. If you start to negotiate, people take positions, they speculate and that is what we were also trying to deal with,” said Prof Ncube.
“So, we needed to restore the monetary policy as part of the tool kit. Look at what we did on the day the Zimbabwe dollar was introduced, we pushed up interests rates to about 50 percent overnight because I was aware and I even know a specific company that I would not mention where they would borrow RTGS at the interest rate of 12 percent and go into the parallel market and take the money.”
Prof Ncube said they will soon appoint a monetary policy committee, then go ahead and strengthen the interbank market.
“We are quite aware that it needs fine-tuning,” he said. “I am the first to admit that. But now we have a full kit.”
Since the introduction of the Zimbabwe dollar, prices of basic goods have been generally stabilising, with most retailers significantly trimming prices.
Similarly, the parallel market rate for forex has been contained, with the interbank market now offering better rates, resulting in long queues of people wanting to change their money through the formal system.
Citizens are now calling on Government to increase the number of bureaux de change so that they don’t take long when changing their money to local currency.