Farai Mabeza, Senior Staff Writer 
BUSINESS has welcomed Reserve Bank of Zimbabwe (RBZ) governor John Mangudya’s latest Monetary Policy Statement (MPS), saying it had touched on key economic fundamentals.
Speaking to The Financial Gazette yesterday, captains of industry and commerce also expressed satisfaction with the fact that the central bank continued to engage them and to heed their counsel on crucial monetary issues.
“The MPS by the RBZ governor is welcome. It is very encouraging to hear that most of the economic indicators are pointing in the right direction. It can mean that if the few remaining ones are addressed, Zimbabwe will take off.
Reserve Bank of Zimbabwe governor, John Mangudya
“Some of the positive takeaways in the statement are the maintaining of the conservative monetary targeting framework and the quarter on quarter reserve money growth of 7,5 percent — down from 10 percent in the last quarter of 2021, which is commendable,” Confederation of Zimbabwe Industries (CZI) president, Kurai Matsheza, said.
He also described the move to maintain the bank policy rate and the medium-term accommodation facility interest rate at the current levels of 60 percent and 40 percent respectively as “a positive stance”.
“Export incentives for most sectors have also been reviewed upwards. This will assist in export growth. However, the incremental incentives for the manufacturing sector are still not good enough,” Matsheza added.
“Measures which buttress the statement by the minister of Finance in encouraging the use of the Zim dollar and the continued use of the multi-currency system were also positive.
“On the other hand, the governor should have given more clarity on refinements to the Dutch auction system, how the country is making efforts to unlock foreign direct investment and offshore lines of credit, the settlement of blocked funds and other debts and facilities to support local productive sectors,” he said further.
Zimbabwe National Chamber of Commerce (ZNCC) president, Tinashe Manzungu, also commended Mangudya’s MPS, especially the review of exporters’ forex retentions.
“The review of exporters’ retentions will encourage exports, as opposed to 2021 where the threshold favoured importers,” he said.“There has been a lot of inconsistency around issues of currency, and some businesses have been taking advantage of arbitrage opportunities that have arisen.
“It is necessary for transparency, consistency and enhancing credibility to have a strong local currency that the market has confidence in.
“As businesses, we have been crying out on allocation delays on the auction and it is good that the central bank has indicated that allocations shall now be settled timeously.
Kurai Matsheza
“The backlogs have created trade disruptions for our members,” Manzungu said, adding that the exchange rate should be liberalised.
“There has been a wide disparity between the parallel market and official rates, which does not speak to economic fundamentals of market forces which should be liberalised for the convergence of currencies,” he said.
Economics professor Gift Mugano also commended the RBZ’s move to help companies recover from the Covid-19 pandemic, particularly those in the tourism industry, which are now allowed to retain 100 percent of their foreign currency earnings.
“I must say that the governor did a good job with his monetary policy. I think key highlights include the export retention reviews.
“That’s a good start, particularly if you are looking at trying to revive companies affected by the Covid-19 pandemic.
“He (Mangudya) also increased the threshold for mobile payments from $35 000 per week to $70 000.
“That’s quite good because it is going to help smoothen transactions. He also maintained interest rates … which is good because we want to avoid speculative borrowing, although it comes with a cost when we look at the cost of doing business.
“So, he did a good job in a number of areas — including putting in place measures to reduce money supply from the central bank point of view by managing money supply per quarter,” Mugano said.
Gift Mugano
However, he cautioned that without adequate support from requisite fiscal policies, Mangudya’s measures would be less effective.
“I have a lot of concerns about how the ministry of Finance and government in general is funding the agriculture and construction sectors.
“I am of the view that the government now needs to migrate from freebies and subsidies to a market-led approach where agriculture can now be funded through a commodity exchange and value chain financing.
“The government’s focus on agriculture should be on addressing market failure by resuscitating irrigation schemes for small-holder farmers and dealing with feeder roads connecting farms,” Mugano added.
“Those are critical areas that government must pay attention to and leave the private sector to focus on production and marketing of agriculture commodities.
“In the construction sector, we need to run away from short-term finance, which we are using to fund roads construction.
“So, what the governor has done will be diluted by these freebies and subsidies to the extent that the inflation target of 25 to 35 percent is not going to be achievable under the current budget framework.
“We will actually be above 100 percent by year-end,” Mugano also said. Another economist, Vince Musewe, said although the RBZ’s interventions were commendable, the structure of the economy would minimise their impact.
“Because 70 percent of the economy has gone informal, formal policy has become rather sterile.
“The informal economy is very adaptive and comes up with its own solutions to money problems. So, the governor has very little room to manoeuvre.
“How do you impact inflation when that inflation is basically driven by the parallel market rate? The parallel market is mainly speculative.
“So, what he can do is to slow down the rate of increase by putting in place policies as he has done,” Musewe said.
“Delays at the auction have a serious impact on the supply chain, which has created bottlenecks in the economy.
“So, what he (Mangudya) said is that the central bank will pay (the forex) in two weeks and people can only bid for the cash that is there. This is a good improvement.
“The demand for US dollar salaries is understandable, but we really can’t dollarise because if we do that we are almost going backwards.
“It can have serious repercussions for assets that are in RTGS. We don’t want to do that because every country should have its own currency,” Musewe added.
In his Monday MPS, Mangudya said the current inflationary pressures required the central bank to further tighten monetary policy to stem exchange rate volatility and anchor inflation expectations.
“The tight monetary targeting framework will remain in place to sustainably anchor inflation expectations and curtail the speculative demand for foreign currency, which has exerted pressure on the exchange rate and prices since the last quarter of 2021,” he said.
At the same time, moves by authorities to defend the Zim dollar and to encourage its wider use in the economy came amid calls by business for them to affirm the currency.
Speaking to The Financial Gazette last week, business leaders said they firmly remained supportive of the broad use of the local unit.
“As business, we are in support of … Mangudya. We feel he is on point with regards to the use of our local currency.
“With all the equipment we have and the rising capacity utilisation, we will crash and become a supermarket economy again if we continue on the path of dollarisation.
“It is unfortunate that the central bank is being let down by other government institutions, some in the private sector and the general citizenry who continue to demand the US dollar when we know of the adverse effects of using the international reserve currency, especially to the productive sectors of the economy,” the chief executive of the ZNCC, Chris Mugaga, said then.
He added that with the coming in of the African Continental Free Trade Area (AfCFTA), the use of the US dollar was not sustainable and would continue to render Zimbabwean products uncompetitive.
“Our focus now should be on how we manage the local currency. We need to fight dollarisation.
“Look at countries like Angola, Bolivia, Venezuela who have all used the greenback at some point. It’s not easy to exit this phase.
“The currency issue is about confidence. The governor has been trying all he can to promote the use of our local currency for the benefit of the country.
“He needs support,” he also said.
