RBZ boss speaks on looming exit

The Reserve Bank of Zimbabwe (RBZ) governor John Mangudya says his top priorities are to leave behind a sound financial system, strong central bank, and stable prices as his two terms come to an end.

Mangudya, an economist by training, was chosen by former president Robert Mugabe to serve as governor of the RBZ on May 1, 2014.

He succeeded Gideon Gono, who accelerated the central bank printing press to keep up with hyperinflation.

On May 1, 2019, President Emmerson Mnangagwa appointed him to a second and last five-year term as governor, which ends next year.

Two years after Mangudya's term was renewed, in an effort to alleviate serious cash and dollar shortage, the RBZ decided to create the surrogate bond note currency, and some say it tarnished his stint at RBZ.

"We have got triple stability issues that we are dealing with—price stability, financial system stability and institutional stability," Mangudya told directors at a recent business breakfast meeting in Harare.

"Moreso, when this governor is going to leave in 2024, it is my wish to ensure that we leave a very stable institution, we leave stable prices in Zimbabwe, and we leave stable banks in Zimbabwe."

Later, he said in an interview with Standardbusiness that by rescuing the nation from a situation of extreme inflation, he had been able to stabilise prices.

"We have got a tight monetary policy stance, we have got a stable pricing system and the banking system is stable and safe," Mangudya said.

"So, what we think of ourselves is that we have moved from a hyperinflationary environment, we have moved from a currency reforms environment, we are now in a stable environment and we want to maintain that environment.

"Therefore, it means that we are between 6 and 7 out of 10. We are very bullish about it."

Prosper Chitambara, an economist, said the governor has done well in ensuring the stability of the financial sector.

However, he said that the former CBZ CEO was still having trouble keeping pricing stable.

"Let's look at the soundness of the financial system and stability. I think he has been a success there," Chitambara said.

"We haven't seen any major banking failure or banking sector instabilities during his tenure. In terms of price stability, there have been challenges, especially chronic high inflation."

The development economist stated that a combination of fiscal prudence on the part of the government and monetary discipline on the part of the central bank were required to ensure price stability.

"In our case, the central bank is not strongly independent and obviously that then affects the objective of ensuring price stability because it means the central government can always seek recourse through the central bank in terms of monetary financing of government projects."

Bulawayo based-economist, Stevenson Dhlamini said Mangudya scored some wins despite the harsh economic environment in the country.

"We appreciate that there has been growth in financial technology ever since he took office,"

"We have seen the introduction of the gold coins that brought some degree of stability of the Zimbabwean dollar," Dhlamini said.

"He did manage in some years to reduce inflation and to prevent it from being a runaway inflation, partly because of his recent approach to the most stringent money supply control.

"However, we still observe that inflation remains high. Ever since he took office, inflation has been very difficult to harness and bring under control."

Inflation stood at 87,6% in March 2023, from 92,3% recorded in the previous month.

While blended figures present a rosy outlook, the local currency has been under pressure, depreciating 34% within the month and the black-market premium widening to 64% as the official rate trails behind.

"Overall, we might say his tenure was one of the most difficult periods as RBZ governor — a period where there was high inflation, unstable exchange rate, balance of payments challenges, and rising external debt," Dhlamini said.

"But he has also tried to come up with ways of reducing domestic debt."

Economist Vince Musewe said: "I would score him seven out of 10 as I think despite the headwinds he faced, both internal and exogenous, he has managed to steer a stable and profitable banking sector in stormy seas."

Musewe said the quasi-fiscal activities of the RBZ have disappeared and this was the main cause of inflationary pressures including speculative behaviours which made some of the monetary policy measures sterile.

"Confidence in the Zimbabwe dollar needs a cocktail of measures and we need to get the politics right first," he said.

"It is clear that as long as we have a multi-currency regime the US dollar will remain the preferred currency and nothing can change that psychology.

"There have been zero scandals at the RBZ during his tenure both at institutional and personal levels as expected with that responsibility and we must give credit to his leadership for that."

Mangudya worked for the central bank as an economist for 10 years until 1996 before joining the African Export-Import Bank (Afrexim) as its manager for southern Africa.