RESERVE Bank of Zimbabwe chief John Mangudya is expected to present his monetary policy statement soon.
No official explanation has been proffered for what appears to be an inordinate delay in presenting this important economic policy prescription, but we are convinced there is serious discord.
All eyes are on Mangudya for many reasons.
The state of the economy is faltering and in need of urgent attention. Inflation is rising fast, the bond note is losing value, production is tumbling, and foreign currency is scarce.
In other words, the prospect of losing savings is more pronounced now than ever before. Essentially, everything that could go wrong in the economy has indeed gone wrong.
Among the key problems Mangudya has to address are rising inflation, price distortions in the economy and the value of the bond note.
The time has come for the central bank and Finance minister Mthuli Ncube to make a bold decision on the currency issue before value and savings are totally decimated.
We feel that one way or the other, we cannot pretend any further that the bond note is at par with the US dollar. The fact that this currency has been trading at a discount to the US dollar from day one is testimony that the market does not agree to such fallacies. Currently, the discount is above 400% against the US unit. And the market always wins.
Against such a background, the government through the central bank now needs to make a frank assessment of Zimbabwe’s economic situation.
Mangudya has to decide on the best solution on the currency dilemna and save the economy which is hurtling down the precipice.
Inflation is rising and threatening to unleash mayhen — if the skyrocketing prices of goods are anything to go by.
Apart from the known problems, Mangudya also must decide the fate of more than US$10 billion worth of savings in Real-Time Gross Settlement balances circulating in the economy.
Are these still US dollars? If not, what are they now?
A decision has to be made on which direction we are taking as a country. Do we default back to the US dollar, seeing as it is that we do not have credible people who can run a central bank effectively and efficiently with a fiduciary duty to the people of Zimbabwe? The inflation rate is testament to the shortcomings of the central bank.
Mines, a major source of Zimbabwe’s foreign currency, also need to be placated if the centre, which is hardly holding, should continue to hold. Gold producers are unhappy with the forex retention rate. Miners do not mind paying duty in forex if they have 100% retention.
Against such a background, the central bank needs to ensure that it does not kill the goose that lays the golden egg.
Current talk of introducing a new currency at a time the economic fundamentals are far from ideal for such a move has unnerved the market. The RBZ chief must exercise prudent stewardship.