eBusiness Weekly
Golden Sibanda
THE Reserve Bank of Zimbabwe (RBZ)’s newly appointed monetary policy committee (MPC) should expeditiously devise interventions to stabilise inflation and the exchange rate to give the economy a better chance of recovery, economic analysts have said.
The MPC is chaired by RBZ Governor Dr John Mangudya, while other members include RBZ deputy governors; Dr Kupukile Mlambo and Dr Jesiman Chipika, industrialist and businessman Kumbirai Katsande and ex-Government advisor and economist Professor Ashok Chakravati.
ABC Holdings founding chief executive Doug Munatsi, economist and former Bulawayo South legislator Eddie Cross, Professor Theresa Moyo and Mrs Marjorie Ngwenya have also been appointed to the critically important monetary policy team.
The Zimbabwe dollar exchange rate has continued on a downslide since being liberalised and trading on the interbank market in February this year, piling more pressure on prices as pricing models have largely tracked the exchange rate movement.
Zimbabwe scraped its domestic currency in February 2009 after the currency was rendered worthless by hyperinflation, which peaked at 231 percent at the last official count in August 2008.
Prior to liberalising the exchange rate, Zimbabwe’s surrogate currency, bond notes and coins as well as electronic or real time gross settlement (RTGS) balances traded 1 to 1 with the US dollar under a multi-currency system introduced in 2009 amid hyperinflation.
But since being allowed to float freely on the interbank market, starting at 2,5 RTGS dollars to the greenback in February this year, the rate has continued to plunge, hitting 14,5 RTGS dollars this week and exerting further inflationary pressures.
Zimbabwe’s annual rate of inflation has raced unrestrained from 5,39 percent September last year, when the Government embarked on a cocktail of reforms under its Transitional Stabilisation Programme to reach 176 percent by June this year.
Exchange rate has been volatile on the parallel market for foreign currency where other importers obtain foreign currency given the priority allocation system followed by the interbank market, including guidance of the central bank to cover essentials.
The Southern Africa country, whose economy is seen contracting 2 percent this year on the back of ongoing reforms and impact natural disasters, is facing volatile economic conditions characterised by acute foreign currency, electricity shortages and fast rising prices.
Economist, Cross, who was appointed by Finance and Economic Development Minister Mthuli Ncube in the nine-member monetary policy committee of the Reserve Bank of Zimbabwe, said the country was in throes of a currency crisis and needed to urgently find solutions to challenge.
Minister Ncube introduced the monetary policy committee this week to oversee Zimbabwe’s monetary policy after reintroducing a fully fledged domestic currency in June and also banned the US dollar dominated multi-currency system, which also entailed the use of the British pound, Botswana Pula, South African rand and Chinese Yuan.
“I think we are in the middle of a very severe currency crisis and I think the MPC has to urgently look at how this can be resolved and situation stabilised,” said Bulawayo based economist Cross, but would not say what exactly needed to be done to resolve the situation.
Former University of Zimbabwe professor of economics and ex-finance ministry advisor, Chakravati, who was also appointed in the nine-member MPC, said the immediate task of the committee will entail finding solutions to contain inflation and stabilise the exchange rate.
“The MPC will need to come up with measures to deal with inflation. It must also come up with measures to stabilise the exchange rate. The exchange rate has been stable around 10 over the past few weeks but now it’s running wild once again, so the monetary policy committee must come up with remedies to this,” Chakravati said.
