eBusiness Weekly
Africa Moyo in KARIBA
The recently introduced RTGS dollars are not new currency, but merely a “formalisation” of transaction platforms that already existed in the country, according to the Reserve Bank of Zimbabwe deputy director for economic research, Nebson Mupunga.
Mupunga, said this during the two-day Employers’ Confederation of Zimbabwe (Emcoz) 2019 human resources indaba that ended on Thursday.
Mupunga said people were already transacting in RTGS, mobile money and bond notes and coins, which the RBZ just “formalised” under the banner, RTGS dollars.
“What we have done as a central bank is we have formalised what was already obtaining. So, we have not introduced a new currency per se. Everyone was talking about RTGS, everyone was talking about bond notes, there was a parallel market exchange rate (and) everyone was saying the 1:1 is no longer sustainable.
“What the Monetary Policy Statement did was just to formalise, to package what we were calling RTGS, together with bond notes and coins into one currency called RTGS dollars.”
Mupunga said to underscore his point that no currency was introduced, conversions of RTGS balances were at par with the US dollar, while liabilities and assets also remained at par. If you had $10 000, it remained $10 000. What happened with the liability side also happened on the asset side. It means if you had borrowed let’s say $100 000, it also remained $100 000.
“So we have not changed the structure of the economy, it remains the same. We said to ensure fairness, the bank is not going to multiply your loan by 2,5, the interbank exchange rate. It would remain the way it is,” said Dr Mupunga.
He added that people were “unconsciously saying 1:1 from the start”, which meant that the country had a local unity against a foreign unit.
“What is that local unit, it is what we now call the RTGS dollar, which is a combination of electronic money and bond notes and bond coins. That is the local currency.
“Bond notes are the physical manifestation of the local currency.”
Inflation pressures coming down
Mupunga explained that the coming in of RTGS dollars acknowledges the free floating of the exchange rate of foreign currency through the interbank market, as the monetary authorities’ team up with Government to find a lasting to economic challenges including inflation.
Year-on-year inflation has been skyrocketing since November last year when it stood at 20,85 percent up to 59,39 percent in February 2019, spurred by food and non-alcoholic beverages.
However, Mupunga said the central bank is excited that month-on-month inflation is receding, an indication that the economic reforms instituted by both the RBZ and Ministry of Finance and Economic Development, are beginning to yield the desired results.
In December last year, month-on-month inflation was 9,07 percent compared to 14,53 percent in November.
Statistics released by the Zimbabwe National Statistical Agency (Zimstat) last week reveal that the February month-on-month rate of inflation was further down to 1,67 percent compared 10,75 percent in January.
The central bank says inflation was being fuelled by rampaging rates of forex on the parallel, which have, however, been contained by the coming in of the interbank market.
The interbank rate started at 2,5 but has marginally risen to about 2,85, which has ensured pricing stability as manufacturers can now plan.
Aim to restore buying power of RTGS
Mupunga conceded that the buying power of RTGS has been reduced by inflation in the recent past.
Fiscal deficit in the country caused the creation of more money into the economy.
Government is now working on fiscal consolidation and is targeting money supply of 10 percent.
“By doing so, we are trying to pin down inflation to almost the same (10 percent). There is that acceptance that salaries have been reduced, and they have been reduced by inflation.
“It’s not the recent policy pronouncement which has actually reduced the purchasing power of salaries, but we know inflation has gone up in October, November and December that actually reduced the buying power.
“But going forward, there is commitment on the part of Government and the Reserve Bank to reduce inflation to levels which are reasonable and we are glad that the trend, which we are witnessing regards inflation, is actually a good trend.
‘‘Now we are seeing moderation in terms of the growth of month-on-month inflation, with the latest inflation at around 1,7 percent, which is a good move,” said Mupunga.
He said citizens should expect their salaries to start buying more in the near future on the back of robust policy measures being implemented.
