Unfortunately, most main stream media chose to mislead or were they kindly persuaded by any means to sing to the choir, but as certain as the sun rises, so shall the monetary policy self destruct.
We sang the same song few years back when the bond notes were introduced, against all mainstream media headlines, not because we do not like to project the good picture, but we strongly feel that its unfair for the experts and media to sing for their supper, when the policy is obviously destructive, and ultimately impoverish the nation.
For us Zimbabwe, as the least productive country in Africa to lie to ourselves that we have the strongest currency in Africa called RTGS, which no other country is willing to trade with is a fallacy which only fools celebrate.
While it was very necessary and commendable for the RBZ to intervene and remove the distortion built by 1:1 lie, the governor announced the move which had a rather selfish solution, as all it did was to exert the 1:1 pressure from the government and dropped the bomb to the business sector.
Business was technically told that all the local balance remained 1:1 while for those importing they would trade at 1:25, meaning the buying rate for importers had weakened as the reserve bank was cushioned, but the local currency saved or earned never remained at the 1:1, buying power has greatly depreciated, as inflation shoots and business re-adjusts to costs.
The RTGS balance is now worth less than 1:4 to the dollar, we cant be living in a lie and continuously hold figures that are already exploding, hoping to continuously hold on, by delaying salary increase a major trigger to inflation, but not the only effect, its a matter of time before that straw breaks the camel’s back.
When Zimbabwe’s central bank governor John Mangudya announced his monetary policy last month, the majority of Zimbabweans expected major policy interventions that would point in the right direction for our economy but alas it was a much ado about nothing.
That’s because prior to his monetary policy statement on Feb.20, Mangudya had rubbished claims by former finance minister Tendai Biti that the government wanted to introduce a new currency .
And then, the central bank head pulled a shocker which left millions of Zimbabweans in shock. Bond notes and all electronic money, were merged into a new currency called the RTGs dollar with a fixed exchange rate 1:1 parity policy on the surrogate bond note currency and the US dollar for a managed floating system.
The central bank head had for a long time remained adamant that the bond note was equal to the US dollar at an exchgange rate of 1:1 and he had so much confidence in the success of the bond note.He even went on to put his head on the chopping block should it fail.
“Give us a chance to do what is right for this economy, to put it back on track. If these policy measures fail, if the bond notes do not work out, I’m willing to resign because I am genuine about getting the economy back on track.” he said.
In as much as the Gvt has exerted pressure off its reserves by sticking to its interbank exchange rate, many companies are being affected by the fact that they are still expected to collect revenue at 1:1 yet they cant access forex from the central bank.According to Market Watch Zimbabwe,the interbank rate has not been stable since the markets have been allowed to determine the exchange rate but has remained bullish.Below is a table that shows how the exchange rate has faired
According to the RBZ,the exchange rate has had a sharp increase from the initial 2.5% they announced.Below is the latest table showing the exchange rate
|EXCHANGE RATES – 25-03-2019|
Telecommunication operators have not been quick to institute any changes on their pricing models but they have been forced to review their prices at the prevailing exchange rate to cushion their operations and drive towards increasing revenue. The price increases by telecoms operators which have been a major subject of debate will in a way change the landscape as the country is moving towards a digital economy.
The liberalization of the exchange rate though a noble move was not done in a manner that would holistically remove distortions that continue to exist in the market.In real essence, the move by the central bank devalued salaries and gave room for grave implications on the inflation as well as the importation of fuel.
Since January ,the country has been rocked by a myriad of price increases which the Gvt has proved not to have a solution for.The fuel price hike in January was a catalyst to a market that already had a plethora of price distortions that were spiraling out of control.Resultantly ,acute shortages of fuel which is a key driver of the economy up to today continue to hurt many Zimbabweans.
The Monetary Policy was greatly expected to address a number of anomalies that still exist in the market and these include forex , fuel shortage and fencing of RTGS balances.Rather its willing buyer willing seller mantra has not provided the much needed forex as there are claims that the banks don’t have adequate forex to transact.
The other stumbling block is that there have no been salary adjustments from the Gvt and the industry at large.This continues to exert more pressure on ordinary Zimbabweans who are being forced to adjust and fork out more for basic goods and services without any salary increment.
From what is obtaining in the market, the Monetary Policy has failed to fulfil its mandate and Zimbabweans must brace themselves for more harsh economic times ahead.