THE monetary policy measures announced earlier this week could help strengthen currency and bring down parallel market rates as officially hoped. But they could also further undermine price stability and exacerbate the crisis, according to analysts.
BY FIDELITY MHLANGA
Reserve Bank of Zimbabwe (RBZ) governor John Mangudya announced a set of 13 policy measures intended to stabilise currency and prices. The most salient include a separation of bank accounts for foreign currency and RTGS (real time gross settlement) transactions; the introduction of a 5% statutory reserve requirement on RTGS accounts to mop up excess liquidity and the expansion of credit facilities for strategic imports.
Other measures include restrictions on government borrowing and new rules intended to deal with foreign currency arbitrage and the externalisation of foreign currency.
With effect from November 1, 2018, Treasury Bills would only be sold through an auction system at market-driven coupon rates.
The most contentious of these measures pertains to the separation of nostro foreign currency accounts (FCAs) from other bank accounts, which will be restricted to RTGS and bond note transactions only with effect from October 15.
The Nostro FCA are backed by US$500 million Nostro Stabilisation Guarantee Facility (NSGF) from the African Export-Import Bank (Afreximbank), which provides account holders with the assurance that foreign currency shall be available when required.
IH Securities, in a review of the monetary policy measures, has asserted that the ring-fencing policy on FCAs is ambiguous.
The brokerage firm has warned that the measure, officially intended to strengthen the multi-currency system by reducing demand for foreign currency and mobilising free funds into the official market, could actually bolster the parallel market where bond notes and RTGS balances have been devalued against the US dollar, the South African rand and other foreign currencies.
“We believe that the associated ambiguity of separating nostro FCAs and RTGS FCAs implies the absence of a more conclusive agenda around currency policy and will result in the continued proliferation of an active parallel market where rates are likely to remain elevated at least in the short term,” IH Securities said in its review.
This view is ubiquitous in the business sector.
CEO Africa roundtable chief executive officer Kipson Gundani said the new policy on FCAs could trigger a wave of price increases as business were likely to benchmark their prices on parallel market change rates.
“The major highlight is the introduction of separate accounts. To me, it’s a direct admission to say the RTGS balances are not USD. Technically, it means we now have a local currency. Yet, the RBZ governor still says RTGS balances are still one as to one with the USD. You will discover that it will put pressure on the business people. However, they benchmark their prices