'Zimbabwe won't rush to mono-currency regime'

THE Reserve Bank of Zimbabwe (RBZ) has given assurances that there will be no rushed exclusive adoption of either the Zimbabwe dollar or US dollar currency regime.

This was revealed by the Confederation of Zimbabwe Industries (CZI) after its meeting with the central bank, which also assured that authorities will not "raid" foreign currency balances held by businesses.

Last week, CZI indicated in its proposed urgent engagement paper with the apex bank on the weakening currency, warned the economy was facing uncertain times if the Government insisted on imposing the depreciating domestic currency on the market.

CZI said the Zimbabwe dollar was on the "brink of rejection in the face of exchange instability and increasing inflation."

It also warned of a possible bank run amid fears of a raid on foreign currency balances.

The industrial lobby also called on  the RBZ to suspend the foreign currency auction system after the Zimbabwe dollar fell to $350 against the greenback on the parallel market against the official rate of $155.

In response, the central bank said the Government and the bank were committed to an orderly de-dollarisation process and that it was incorrect to suggest a "mono currency was now in place.

It also said the foreign currency auction would remain in place and that it would not be suspended as doing so would cause shortages of goods in the market and abet inflation.

Further, the central bank stressed that all foreign currency accounts were safe and that the bank had no reason or appetite to "raid" the accounts, as suggested by CZI.

The bank noted that CZI's engagement paper created a negative impression that had the potential to drive inflation and confusion in the domestic market.

In a statement yesterday, CZI president Kurai Matsheza said their statement headlined "CZI urgent engagement paper on the deteriorating currency situation" circulated unintended but was meant for dialogue with the authorities.

"We have subsequently met with the RBZ Governor, Dr John Mangudya and would like to highlight the outcome of our meeting.

"The CZI wishes to relay the following specific matters discussed with the Governor and the assurances given on the same: The de-dollarisation is going to be a process and no rushed return to an exclusively Zimbabwe dollar or US dollar environment is planned, there is no intention to ‘raid' foreign currency balances, and the auction backlog is a priority for the RBZ and concerted efforts are underway to clear this backlog."

He said the other matters raised in the said CZI document shall form the basis of further consultations between the industrial body and the authorities on a continuous basis as has been the normal and usual custom.

"As CZI, we remain committed to engage with the Government and collaborate in the best interests of the economy, our members and business," said Mr Matsheza.

In their engagement paper last Friday, CZI also suggested that foreign currency retentions be financed through the budget and that banking institutions encourage exporters to freely set reserve prices and sell their foreign currency on the auction system.

It also called for the RBZ to suspend quasi-fiscal activities which increase money supply growth and create arbitrage opportunities or market distortions.

CZI also suggested that the Apex Bank should do away with the foreign currency priority list and liberalise the market, while also keeping tight control on money supply.