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‘Monetary policy should address forex shortages’

RESERVE Bank of Zimbabwe (RBZ) governor John Mangudya is expected to announce the monetary policy statement month-end amid calls by economic analysts for the apex bank to deal with foreign currency shortages.


Zimbabwe National Chamber of Commerce CEO Chris Mugaga said the monetary policy statement comes against a backdrop of so many expectations, not only for business but also for ordinary citizens and investors “after such an ambitious budget which came in December, where we saw a change of course by this new administration”.

Mugaga said the governor should do a follow-up on the budget by taming the fiscal deficit through reducing bank overdrafts and treasury bill issuances which have bred the current cash and forex shortages.

“We want to believe there will be a follow up on issues which were raised in the budget. One issue which has come up very loudly is the issue of fiscal deficit. You know government is targeting to put it at around $600 million and given that it’s an election year, it can become difficult. The current cash shortages that the country is facing are not new to Zimbabwe. They have to be solved within the framework of government spending. I think it is a monetary policy which has to be more independent than ever before,” he said.

“I think we know what has been funding the deficit are either bank loans or overdrafts… but, it [RBZ] has to be seen as somehow independent in advising the government to exercise restraint or austerity.”

Confederation of Zimbabwe Industry president Sifelani Jabangwe said there should be an improvement in the allocation of forex to ensure production in the manufacturing sector.

“On the issue of forex, there is inadequate currency in the economy. A lot of companies are queuing for hard currency at the RBZ and are not getting it. We want that to be attended to,” Jabangwe said.

Jabangwe said given that corporates were buying forex at a huge premium at the parallel market, there needed to be an option of formalising trade of forex between those with excess and those without at reasonable premium.

“There should be an improvement on the forex allocation system so that those who have it can sell it to those who don’t have it. There are net exporters in this economy. There should be an exchange of forex for an incentive. It’s actually an acknowledgement that there is a shortage and companies are getting it at a huge premium on the black market. Why not open to those who can trade it openly and this can be done to non-essential products. This can actually reduce the premiums on the black market,” he said.

Economist Clemence Machadu said the monetary policy statement must restore people’s trust in the banking sector and smoothen money circulation in the economy.

“The circulation of money is not smooth and monetary authorities need to move in and put catalysts to ensure that money flows across various economic agents to allow for economic activities to optimally thrive,” he said.

Financial expert Persistence Gwanyanya said the apex bank should look beyond Afreximbank for liquidity support.

Economist Moses Chundu said the biggest challenge was building confidence following the change in the political dispensation.

“The current administration has a challenge to deliver on the liquidity front as citizens are comparing what is happening now with what prevailed in 2009 when the results were almost instant. The issue of a three-tier pricing system is not an industry issue but a symptom of distortions in the monetary sector, hence the need to address it from a monetary perspective,” Chundu said.

He cautioned RBZ from playing “Father Christmas” by dishing out money in the form of special facilities as the practice had no “record of success, especially in Zimbabwe”.

“It only works to distort the sector further. If there is one sector that is allergic to command policies, it is the monetary sector. We’ve said it before [that] bad money crowds out good money,” Chundu.

He said the next bold step to bring sanity on liquidity issue was to disband the bond note regime and revert back to the multicurrency anchored by the dollar.

“Anything short of this is applying makeup to a corpse,” Chundu said.

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