eBusiness Weekly
Kudzanai Sharara in Accra, Ghana
The latest policy measures implemented by fiscal and monetary policy authorities, are our “best foot forward” in the country’s quest for exchange rate stability, according to Reserve Bank of Zimbabwe governor Dr John Mangudya.
As part of latest measures Government allowed businesses to retain 100 percent of foreign currency proceeds from domestic sales to encourage the banking of such revenue.
This is opposed to surrendering 15 percent of export proceeds to the RBZ in exchange for the local currency, a requirement businesses regarded as an indirect tax given the disparity with the open market exchange rate.
Treasury also announced it would assume all sovereign external debt payment obligations from the RBZ to free the apex bank from being forced to print the local currency to buy the forex.
In addition, Minister of Finance and Economic Development, Mthuli Ncube, said all levies and charges for Government services would be paid in local currency to promote its wider use and demand.
Customs duty is now payable in local currency, with the exception of designated or luxury goods and where an importer opts to pay in foreign currency.
On its part, the RBZ’s Monetary Policy Committee, in an adhoc meeting, resolved to increase the bank policy rate from 140 percent to 150 percent per annum in response to the recent increase in inflation.
The weekly auction was changed and now offers just US$5 million a week with bid limits set at a minimum of US$1 500 and a maximum of US$50 000.
A new wholesale auction system, where banks bid on behalf of their clients, was introduced and has the interbank maximum trading limits of between US$100 000 to US$500 000.
Since these measures were introduced, the local unit has depreciated from trading at $1404.80 to the greenback to Tuesday’s $6,926.
However, these measures, according to Mangudya, represent, the “best foot forward” for the country bedevilled by currency and price instability.
“Definitely we have struck the right chord, that’s what we have been longing for as a country, and because of reaction to those measures by both the private sector and Government, it means we have struck the right chord” said Mangudya in an interview on the sidelines of the Afreximbank Annual Meetings that ended on Wednesday in Accra, Ghana.
The central bank governor said what is now left is consistence.
“Consistently doing what we said we would do.”
He said in life even if you are doing something wrong but people know that you are consistent, they will know how to manage.
He said some war torn countries are doing well economically because people know what the environment is like.
“So what we now need in the country is to consistently apply our policies in the way we have put them on the table and I do believe what we have put in place is the best foot forward which we don’t need to change anymore.
“One can only improve but not change the measures that we have put in place. That way we become credible, we become consistent and increase confidence, because confidence is the best currency that any Government, any central bank, can give to it’s society,” Mangudya said.
Asked why this time will be different given unsuccessful measures in the past, Mangudya said “we cannot continue to live in the past, we now need to go forward and we cannot go forward using historical reasons which will not make us prosper”.
He said the message at the Afreximbank’s Annual Meetings is that you cannot develop local economies using foreign currency.
He, however, said for us to achieve full use of the local currency, there is need to have fundamentals right.
He says only fundamentals give people conference.
“Those fundamentals means tight monetary policy stance, means fiscal policy stance, it also means to have access to foreign currency from Afreximbank and others and that the bank’s are stable.
“Those are the fundamentals, are we there yet, we are almost there,” he said.
Mangudya said the exchange rate tumble recorded following the new measures has reached equilibrium, a ceiling because “we have no more local currency in the economy”.
This, accompanied by Government demanding taxes in local currency, can only strengthen the Zimbabwe dollar.
