RBZ readies to deliver monetary policy

RESERVE Bank of Zimbabwe Governor Dr John Mangudya is, before the end of this month, expected to present his monetary policy statement with market watchers expecting him to at least dwell on the currency reforms issue which has caused distortions on the market.

Although, he will definitely not announce a new currency for Zimbabwe after Finance and Economic Development Minister Professor Mthuli Ncube said this was likely to be done in the next 12 months, Dr Mangudya is at least expected to provide a way forward especially on the distortions in value between the RTGS and the US dollars.

Officially the US dollar and the RTGS is pegged at 1:1 but companies and the general public are informally trading them at 1:3 or more. This has caused price distortions while workers, mostly still earning RTGs have complained that the mismatch has eroded the value of their earnings.

In an interview, Dr Mangudya confirmed that he will present the monetary policy before month end but refused to dwell on the issue of currency reforms.

"Monetary Policy Statement is normally presented by end of January of each year as required by the RBZ Act," he said.

Apart from the issue of currency, the policy is also set to address shortages of foreign currency especially to industry and the fuel sector which has threatened to cripple production.

The RBZ allocates foreign currency to key sectors of the economy and of late the country has been experiencing shortages of fuel, while virtually all companies that import raw materials are knocking on the Central Bank's door asking for money.

The policy will also be guided by the dictates of the Government's Transitional Stabilisation Programme (TSP).

According to the TSP, the Reserve Bank must co-ordinate financial sector interventions in support of the Vision towards Getting Zimbabwe Back to Work.

"This will require a more active drive to inculcate a culture of foregoing consumption, allowing higher domestic savings mobilisation through the domestic financial system. In this regard, monetary policy measures to incentivise growth of savings, support economic stability, growth and employment creation will be pursued under the Transitional Stabilisation Programme. Alongside growing a domestic financial savings base in support of increased financial institutions' lending to the private sector, will be the strengthening of measures that call on borrowers to assume greater accountability over honouring loan obligations," read the TSP.

Further, according to the TSP, the RBZ must implement currency reforms, which will include measures to bring compatibility between banks' deposits, RTGS balances and foreign currency resources on the market. It is also expected to ensure banks maintain the value of RTGS by increasing interest rates on deposits to encourage banking by the public. The RBZ is also expected to announce new lending rates that will encourage industry and individuals to borrow for productive purposes.

However, economists noted that the RBZ, must immediately address the issue around RTGS and US values.

"Right now everything is revolving around the issue of currency. That is where the problem is, we need to come up with a way forward.

Accept that RTGS and US dollar does not have same value, discard bond note or come with our own currency. These are some of the possibilities," said an economist with a financial institution in Harare.

Finance Minister Prof Ncube has, however, maintained that currency reforms were already in the pipeline and in 12 months the country will have its own currency. He has also discounted the idea of using the Rand.