RBZ not ready for Zimdollar return

Speculation that the Reserve Bank of Zimbabwe (RBZ) is readying itself to reintroduce the demonitised local currency gained momentum last week when former Finance minister Tendai Biti tweeted that the government was about to revive the Zimbabwe dollar.

Denials by the government have failed to calm the market as Zimbabweans continue to bear the brunt of a currency crisis that worsened following the introduction of bond notes in 2016.

RBZ governor John Mangudya (JM) yesterday told our senior reporter Xolisani Ncube (XN) that he does not see Zimbabwe introducing its own currency in the next 12 months because the economic fundamentals were not yet in place.

Mangudya also spoke about the alleged rift between him and Finance minister Mthuli Ncube caused by disagreements over currency reforms. Below are excerpts from the interview.

XN: What is your comment on reports of a fallout between you and the Finance minister Mthuli Ncube over the monetary policy statement, resulting in delays in its delivery?
JM: There is no fallout between the minister, Honourable Professor Ncube, and myself as alleged.

The whole story is all fiction and fake news of the highest magnitude. The meeting that is alleged to have taken place between officials from the Reserve Bank of Zimbabwe, including myself, with the minister never took place, which means everything else that was alleged to have happened at the non-existent meeting is fiction meant to confuse the market for reasons better known to the so-called "reliable sources". I don't stoop that low.

XN: If that is the case, what has caused the delay in the presentation of the monetary policy statement which you once indicated was due early this month?

JM: There is no delay in the presentation of the monetary policy statement. The last one was done on October 1, 2018.

I am quite aware that the market is waiting for the statement in view of the need to ensure that the economy remains competitive.

We shall soon advise the public of the date for the presentation of the statement. The idea that we have delayed is being peddled by people with an agenda only known to themselves.

XN: How about reports that the delays are being caused by disagreements over the pending re-introduction of a local currency? Have you made any plans to re-introduce the Zimbabwe dollar?

JM: No, not at all. I read that from the newspapers and social media. It is fake news again.

XN: Do you think it is feasible to introduce a local currency in the next 12 months considering that the state of the economy remains poor?

JM: Economic fundamentals need to be right before introducing our local currency. We also need social cohesion. People must be prepared to accept it for it to succeed. So we need those to be in place and we are working on ensuring that we deal with the fundamentals. We can then start to talk about the introduction of a local currency.

XN: Considering that your tenure as RBZ governor is about to come to an end, what would you consider to be your biggest achievements and failures?

JM: I believe that I did my best by modestly working for the economy under very difficult exogenous geopolitical conditions and sanctions on the country.

The sanctions have three layers (which is) Zidera (US' Zimbabwe Democracy and Recovers Act), Ofac (US's Office of Foreign Assets Control) and Agoa (United States' Africa Growth and Opportunity Act). Access to foreign finance under these conditions becomes very difficult, more so, for a dollarised economy like Zimbabwe that depends on access to foreign finance.

XN: Do you ever regret introducing the bond notes in light of the fact that their introduction worsened foreign currency shortages and did not solve cash shortages as was anticipated?

JM: No, not at all. The introduction of bond notes did not worsen foreign currency shortages. That's a myth and fiction.

Bond notes were introduced to monetise the export incentive scheme, which greatly assisted the growth in exports over the past three years by an average of 25% per year.
Cushioning exporters by between 5% and 20% is meant to make exporters competitive and to increase foreign currency generation.

That policy cannot, therefore, cause shortages of foreign currency. In fact, the opposite is true.

The country needs to increase production and productivity across all the sectors of the economy in order to increase and conserve foreign currency.

XN: During your time as governor, the RBZ has signed deals with Afreximbank worth hundreds of millions of dollars. Why are the terms of these deals kept a secret if they are transparent and meant to help Zimbabwe?

JM: All the facilities granted to Zimbabwe by the African Export-Import Bank (Afreximbank) were done transparently in line with the Reserve Bank of Zimbabwe Act.
The facilities have greatly benefited Zimbabwe at the hour of need.

XN: If you are given a fresh term as RBZ governor, what would you do differently?

JM: The role of the governor of RBZ as enshrined in the RBZ Act is to safeguard price and financial sector stability, I would do that as required by the law and I am doing it.

XN: Has the recent fuel price increase eased the pressure on the RBZ in terms of sourcing for foreign currency?

JM: The increase in the price of fuel indeed eased pressure on foreign exchange demand and on arbitrage opportunities.

We had a lot of exploiting of the price to the detriment of the economy.

The price of fuel was undervalued compared to its value across the region and this caused the pressure on us.

XN: For how long will the RBZ maintain the 1:1 rate between the US dollar and the bond notes given the fact that the market has rejected this notion?

JM: The purpose of the export incentive scheme was to provide a premium to exporters so that they continue to increase foreign currency earnings required to maintain the 1:1 parity and I think we are doing that.

As I said, I believe the export incentive has helped us increase our foreign currency earnings and maintain the 1:1 parity.