Mishma Chakanyuka, Staff Writer 
EXPERTS say there is a need for the Reserve Bank of Zimbabwe to start buying US dollars off the market to restore equilibrium in the economy.
It comes as the country is currently experiencing a Zimdollar liquidity squeeze, which is expected to continue for a while as the authorities strive to further stabilise the local currency.
Speaking during an executive dialogue on currency issues that was hosted by The Financial Gazette on Tuesday, economic analyst Eddie Cross highlighted the need for the Reserve Bank of Zimbabwe (RBZ) to buy back US$ of the market to build the country’s reserves.
Eddie Cross Cross is a former member of Parliament and a member of the RBZ’s Monetary Policy Committee.
“If the government sticks to its present package of proposals, it’s going to be necessary for the monetary policy committee to issue an instruction to the reserve bank to start buying US$ off the market because there is a surplus in the market… that’s going to lead to us building reserves.
‘That’s what the Yuan does, the Chinese undervalue their currency and they buy US$ off the markets, that’s why China has the biggest foreign currency reserves in the world. Zimbabwe has no reserves… we need to get to a point where the central bank starts buying the currency using the local currency and maintain stability at a rate it decides is technically correct and fix it there,” Cross said.
“This does not increase the rate of inflation because you are buying currency and not increasing the supply of currency.”
RBZ Monetary Policy Committee member, Persistence Gwanyanya concurred with Cross saying that this would help restore equilibrium in the economy.
“The monetary policy committee should recommend buying back the US dollars in the economy, as we restore equilibrium in the economy,” Gwanyanya said.
“We are in a situation where the 80 percent dollarisation in the economy is the centre of the challenge.
“As the economy increasingly dollarises, it is incidentally resulting in the accelerated depreciation of the Zimbabwean dollar,” Gwanyanya added.
“What you are trying to do by tightening the local currency and underwriting it through a government policy, to widen its usage.
“Those who feel need the Zimdollar should now look for it in the right address , which is the bank. If the bank does not have, they must come to the central bank and we install the equilibrium in the market.”
Christopher Mugaga, the ZNCC chief executive officer.
The chief executive of the Zimbabwe National Chamber of Commerce, Chris Mugaga recently told The Financial Gazette that the prevailing Zim dollar squeeze was “a necessary evil to establish stability”.
However, he also described it as a case of “robbing Peter to pay Paul” as the crunch was negatively affecting other sectors of the economy.
“The temporary liquidity squeeze that we are seeing in the market has helped to stabilise the market. It has stabilised exchange rates and inflation in the short term.
“Yes, for some of our members, there has been an issue with cash flows, taxes and other payments that have to be paid in local currency, but most of them have complied.
“However, the other issue that we are seeing is that although the crunch has re-asserted stability, it has hurt government contractors.
“Some of these contractors have not got their payments and this has negatively affected their operations,” Mugaga said.
He added that businesses expected the liquidity crunch to be buttressed by appropriate policy measures to foster sustainable money supply discipline by authorities. newsdesk@fingaz.co.zw
