News / National
Mangudya in monetary policy fix
08 Feb 2019 at 08:48hrs | Views
DISCORD between Reserve Bank of Zimbabwe (RBZ) governor John Mangudya and Finance minister Mthuli Ncube over policy issues around currency reforms has delayed the presentation of the monetary policy statement (MPS) after the central bank chief was ordered to go back to the drawing board, Zimbabwe Independent can report.
Statutorily, Mangudya was supposed to present the much-awaited policy document at the end of January.
On Monday, Mangudya told this paper that he was certain he would present his policy on Thursday (yesterday) as he was awaiting the President's approval.
However, highly-placed sources told the Independent that Mangudya wanted to present the MPS on time, but he had not consulted any of the key stakeholders in open display of lack of congruency between Ncube and the RBZ. It is understood that Ncube was not in agreement with some of the policy issues in the MPS, especially those around currency reforms with Mangudya pushing through his 1:1 parity between the bond note and the US unit, a move Ncube feels is no longer sustainable.
Sources say Ncube believes the country cannot remain in denial on the real value of the bond note.
According to the same sources, government wants to ensure his policy pronouncements do not cause political mayhem as seen in the past few weeks characterised by massive demonstrations.
The protests were triggered by government's decision to increase fuel prices by 150% in line with the parallel forex market rates.
"Mangudya wanted to present the monetary policy without consultations and given the recent upheaval that resulted in deaths of innocent civilians people were no longer sure what he would present and what the response would be. Anyway that was beside the point, the real issue is there appears to be lack of rapport between the RBZ and Ministry of Finance. Even as a governor consultation is key with stakeholders," the source said.
Mangudya, among other things, fears that the exchange losses stemming from devaluation would be devastating.
The huge exposures that the RBZ has will certainly backfire if the country goes the devaluation way.
"He has been borrowing in principle. The money would come and get dished out. The borrowed money needs to be repaid. Once he introduces an exchange rate, the exposure would go up in line with the rate. That is why he has been insisting on the 1:1 song," the source said.
Mangudya only started consultations with the key stakeholders last week and a number of sources have confirmed that they had received notice to submit their input towards the MPS.
Mangudya told a meeting of tobacco growers on February 5, 2019 that the economy would not be re-dollarised. He said increased local demand for full US dollar settlements of wages and investments would not be supported.
Mangudya told the Tobacco Industry and Marketing Board (TIMB) that the MPS would be presented by mid-month, adding it will spell out how much forex the farmers would receive from the tobacco auction proceeds.
"Yesterday, Tuesday February 5, 2019 growers associations and the TIMB met with the RBZ Governor. We prepared and presented, on behalf of all farmers, a Position Paper on a proposed settlement of farmers' proceeds for the 2019 marketing season. In response the Governor stated that there will be NO re dollarisation of the economy.
Increased local demands for full US dollar settlements of wages, investments, etc by various sectors will not be supported, Export Incentive was no longer attractive and other options will be explored . . . a monetary statement will be announced by the middle of the month and it will contain the settlement of tobacco farmers' sales proceeds," noted TIMB.
Another source said the headache was over currency reforms, adding Mangudya could no longer afford to remain silent on the issue.
"The issue of exposures of the Reserve Bank speaks to the delay. The headache is over currency reforms, I think he can no longer defer the currency issue anymore. He has to say something whether it's devaluation or re dollarisation. Frankly, the only option is devaluation, the status quo no longer works. That is what upset the market the other time and continued denial will further destroy. Reading between the lines, he has acceded to devaluation," a source said.
Finance Ministry permanent secretary George Guvamatanga said he would not comment on the issue as all issues to do with monetary policy are the governor's responsibility. "It would not be fair for me or even the minister to comment on the MPS, as all issues to do with it are the mandate of the governor in terms of the law. I cannot say anything," he said.
Statutorily, Mangudya was supposed to present the much-awaited policy document at the end of January.
On Monday, Mangudya told this paper that he was certain he would present his policy on Thursday (yesterday) as he was awaiting the President's approval.
However, highly-placed sources told the Independent that Mangudya wanted to present the MPS on time, but he had not consulted any of the key stakeholders in open display of lack of congruency between Ncube and the RBZ. It is understood that Ncube was not in agreement with some of the policy issues in the MPS, especially those around currency reforms with Mangudya pushing through his 1:1 parity between the bond note and the US unit, a move Ncube feels is no longer sustainable.
Sources say Ncube believes the country cannot remain in denial on the real value of the bond note.
According to the same sources, government wants to ensure his policy pronouncements do not cause political mayhem as seen in the past few weeks characterised by massive demonstrations.
The protests were triggered by government's decision to increase fuel prices by 150% in line with the parallel forex market rates.
"Mangudya wanted to present the monetary policy without consultations and given the recent upheaval that resulted in deaths of innocent civilians people were no longer sure what he would present and what the response would be. Anyway that was beside the point, the real issue is there appears to be lack of rapport between the RBZ and Ministry of Finance. Even as a governor consultation is key with stakeholders," the source said.
Mangudya, among other things, fears that the exchange losses stemming from devaluation would be devastating.
The huge exposures that the RBZ has will certainly backfire if the country goes the devaluation way.
"He has been borrowing in principle. The money would come and get dished out. The borrowed money needs to be repaid. Once he introduces an exchange rate, the exposure would go up in line with the rate. That is why he has been insisting on the 1:1 song," the source said.
Mangudya only started consultations with the key stakeholders last week and a number of sources have confirmed that they had received notice to submit their input towards the MPS.
Mangudya told a meeting of tobacco growers on February 5, 2019 that the economy would not be re-dollarised. He said increased local demand for full US dollar settlements of wages and investments would not be supported.
Mangudya told the Tobacco Industry and Marketing Board (TIMB) that the MPS would be presented by mid-month, adding it will spell out how much forex the farmers would receive from the tobacco auction proceeds.
"Yesterday, Tuesday February 5, 2019 growers associations and the TIMB met with the RBZ Governor. We prepared and presented, on behalf of all farmers, a Position Paper on a proposed settlement of farmers' proceeds for the 2019 marketing season. In response the Governor stated that there will be NO re dollarisation of the economy.
Increased local demands for full US dollar settlements of wages, investments, etc by various sectors will not be supported, Export Incentive was no longer attractive and other options will be explored . . . a monetary statement will be announced by the middle of the month and it will contain the settlement of tobacco farmers' sales proceeds," noted TIMB.
Another source said the headache was over currency reforms, adding Mangudya could no longer afford to remain silent on the issue.
"The issue of exposures of the Reserve Bank speaks to the delay. The headache is over currency reforms, I think he can no longer defer the currency issue anymore. He has to say something whether it's devaluation or re dollarisation. Frankly, the only option is devaluation, the status quo no longer works. That is what upset the market the other time and continued denial will further destroy. Reading between the lines, he has acceded to devaluation," a source said.
Finance Ministry permanent secretary George Guvamatanga said he would not comment on the issue as all issues to do with monetary policy are the governor's responsibility. "It would not be fair for me or even the minister to comment on the MPS, as all issues to do with it are the mandate of the governor in terms of the law. I cannot say anything," he said.
Source - the independent
