RESERVE Bank of Zimbabwe (RBZ) governor John Mangudya says the currency crisis in the country may drag for three to five years, roughly estimating the time it could take to correct the economic and financial imbalances driving the fragilities.
BY TATIRA ZWINOIRA
The central bank chief said this in New York City, United States, last Friday while responding to questions from Bloomberg, a financial, software, data and media company based in that country, on the sidelines of an investor conference.
“We think within the next three to five years, we will be able to achieve what we want to achieve in the currency reform process,” Mangudya said.
“The introduction of the Zimbabwean dollar will only happen after the fundamentals have been met and the economic fundamentals right now are weak for a local dollar.
“The economic fundamentals that are there are basically three; we need to ensure we improve on confidence, business and consumer confidence.
“Two, we need to ensure that we reduce the fiscal imbalances that are putting pressure on the financial services sector and the rate of exchange and thirdly, we need to have access to foreign finance. When those things are done, then we can have our local dollar.”
Mangudya is part of a Zimbabwean delegation headed by President Emmerson Mnangagwa attending the 73rd session of the UN General Assembly that opened on September 18.
Zimbabwe is currently faced with a currency crisis, which began on dollarisation in 2009 and aggravated after the introduction of bond notes in 2016.
The crisis is defined by low foreign currency reserves, a shortage of bond notes and coins in circulation and a vibrant parallel market for foreign currency, buoyed by a fixed bond note/US$ peg of 1/1, which the RBZ has not been able to defend.
Zimbabwe depends almost entirely on export receipts and diaspora remittance for US dollar liquidity.
Persistent budget deficits have seen import cover falling to just about two weeks since 2015, showing an unsustainable external position.
A recent trade report of the Zimbabwe National Statistics Agency (ZimStat) shows that the country’s total import bill rose 26%, two percentage points above exports, in the six months to July 31 this year and pushed the trade deficit 27% higher to $1,48 billion from $1,15 billion in the comparable period.
Low banking confidence has also seen a one-way flow of bond notes and coins between banks and its clients.
Finance and Economic Development minister Mthuli Ncube, who is also part of the Zimbabwean delegation, has been tasked with seeking investment opportunities as well as engaging US authorities over sanctions.
Government is struggling to clear its $1,2 billion arrears with the World Bank, one of the factors holding up monetary support from multilateral financial institutions.
The US wields substantial voting power over the IMF and the World Bank and is seen as key to unlocking new funding from the Bretton Woods institutions.