Business reacts to monetary policy statement

Eddie Cross


Reserve Bank of Zimbabwe (RBZ) governor John Mangudya yesterday announced the eagerly awaited monetary policy for 2019, in which he liberalised the trade of foreign currency and effectively declared the real time gross settlement (RTGS) dollar as the local currency. Below are reactions from analysts, economists and industrialists:

Godfrey Kanyenze, director for Labour and Economic Development Research Institute of Zimbabwe:

The RTGS dollar is a local currency that has been introduced by the governor. It is a desperate measure that the governor has taken because the fundamentals are not right for the introduction of a local currency. There is need for the availability of foreign currency for a local currency to be introduced. The availability of foreign currency is the only way to make the rate go down because as long as there is no foreign currency, the rate will continue to rise.

Former Finance minister Tendai Biti:

(Reserve Bank of Zimbabwe governor John) Mangudya is a thief because he has effectively devalued people’s salaries to the extent that if you earn $500, it means you now earn $100. There are going to be implications on inflation and there is going to be an impact on fuel prices and the economy, electricity costs, and there will be shortages at supermarkets.

Further floating the exchange rate and retention of the bond note will guarantee the continued existence of corruption in this economy. Zanu PF elites will continue raiding the RBZ for cheap foreign exchange, which they will arbitrage.

Liberalising or floating the exchange rate, without ring-fencing RTGS balances, will have the disastrous consequences of devaluing people’s balances and floodgates of litigation will open. Only Parliament can float or liberalise the exchange rate.

The RTGS dollar is a lot of rubbish, anything short of demonetising the bond note will bring futile results, and there is need for dollarisation.

Sam Malaba, Agribank chief executive:

He has managed to deal with currency imbalances by allowing the rates to move to an interbank market rate, whereby the RTGS and nostro balances can trade in the nostro system on a willing-seller, willing-buyer basis, that’s removing a slight element of distortions. He has also indicated that he will provide some seed funding to the banks to meet bona fide import(s) requirements. Therefore, that will help to stabilise the exchange rate. By moving the rate, he is now allowing exporters to get the full value and not to subsidise importers.

Industrialist Delma Lupepe:

I am in full support of the monetary policy. I am sure in the near future we will be having our own currency. That is the next step. We are in the right direction. It could do a lot for us. For instance, remove price distortions. For us industrialists, it will help attract investors because investors could not understand the bond notes issue. It will bring stability to the economy, hence attract foreign direct investment.

Isaac Kwesu, Chamber of Mines chief executive:

The issue of the interbank trade of forex is a step in the right direction, as this will go a long in the preservation of value for exporters. It is our hope that the RBZ will pay the miners timeously to allow them to have adequate forex to import the equipment.

It is our prayer that the remaining percentage will be paid at the interbank rate to reduce the risk of affording the local inputs, which has gone up four-fold.

Sifelani Jabangwe, Confederation of Zimbabwe Industries president:

I think it speaks to our plea that we have been pushing to have a platform to trade forex. From the management perspective, it will allow us to plan using the prevailing rate. Business was getting from the black market and some were now using extremely high rates, but now this will normalise because there will be an official rate to work with. What is important for now is for the central bank to manage liquidity so that it won’t go out of control.

Industrialist Busisa Moyo:

The only move that I feel was not correctly analysed is the introduction of a 30-day limit. While I understand that it intended to encourage market players to use or spend their dollars on production, on the other hand, it will have the effect of driving dollar savings offshore. We are likely to see an increase in foreign direct investment since investors will get full value.

Economist Eddie Cross:

I am not going to be surprised if the rate is going to weaken again a few days later, but his announcement is a welcome development. For more than a year, the country had been trading in the black market sector, which was not a good thing.

The market in which the US$ should have been trading was a ratio of 4:1 to the bond note. What he has done is that he has set up a formal market and put into existence a system where banks and financial institutions can start trading in foreign exchange.

One can now take money from their nostro account and exchange it into RTGS, and that is the shift because we had a situation where no official market was in existence.
Felix Mhona, chairperson of the Parliamentary Portfolio Committee on Budget and Finance (Zanu PF)

What the governor has now done is to formalise the black market rate and we feel that is the way to go. What it now means is that people will get foreign currency from the formal market, instead of the black market. As a committee, we will need to meet to look at the impact of the floating of the exchange rate on salaries and the economy.

Emcoz president Oswell Binha

The challenge with our country is that there are a lot of monumental mistakes that were done by the central bank and government in the past. It will not be easy for us as a country to correct those mistakes. As business players, we had put up what we call a call to action and we believe that, for once, government has listened to our call and plea. The pronouncement by the central bank is purely what we had proposed as business.

In essence, governor Mangudya has floated the exchange rate and allowed the market, through the banks, to determine the exchange rates as opposed to government and reserve bank being the ones to determine the rate.

Under the circumstances, we believe the governor has bit the bullet and come up with the best monetary policy statement and we now need to monitor, going forward, how this turns out to affect the economy. We believe we need to keep the dialogue door open between the central bank, government, economists, and all relevant stakeholders.


  1. The beautiful ones are not yet born

    Biti can be such a bore. He just feels has has to say something negative to make it seem like he has better ideas. There is nothing constructive that comes out of him. Just the Hubba student activist noise. Thats how you lose credibility. Its good for the crowds, but sensible people will question your mental stability.

    1. its only a matter of time ,you will see that Biti is right, what the rbz did is to bring back local currency without the required economic fundamentals in place so the effect is that the rtgs dollar will lose its value

      remember biti warned the government about introduction of bond note now look what happenned?it lost its value

  2. So according to the majority of the so called business experts this is a step in the right direction… Deal with the elephant in the room please!!! We have an unreformed gvt that have no clue about discipline (except to send in the police and military to teach children, women and innocent people a lesson). What happens when they start to increase money supply as they will do… the rate will run, they will impose controls, they will empty the FCAs, and we will be back saying “they have done it to us again”

  3. One of the saddest thing in Zimbabwe right now is that we all, particularly the educated and those in policy decision making positions, have lost common sense, a commodity which is a fundamental in fixing the problems we have. Look, Gideon Gono once tried the foreign currency auction system after a study tour of Zambia, whose introduction was touted as a master stroke by all and sundry. Then what happened? Disaster ensued. Reason: There was no optimum levels of foreign currency for the auction system to effectively apply simply because the economy had since ceased optimally producing surplus value required by international markets.
    I’m therefore surprised by all those ululating for the coming in of the so-called official foreign currency exchange market as announced by Mangudya, that the policy mismakers and their faithfuls wish will kill the parallel market. Well,the hard scientific fact on the ground is that there is serious shortage of foreign currency, a situation, as always, that presents the black market with an extremely larger market share opportunity. As soon as the so-called official system adopted the black market rate of 4:1 as reported, the latter moved geometrically(not arithmetically), to something higher than double 4:1 rate, thus maintaining the attractiveness of the black market and only fools continue to believe they will ever catch up to destroy it. The solution lies in production by going back to the basics, NOT to be fiddling with exchange rates on paper nor having endless dialogue over mazowe orange juice and cancerous mineral water. As long as our warehouses are empty of any goods of value to the international market, then no matter how we try some abra kadabra hoca spocus with the exchange rate nothing will materialise, for proper exchange rates are determined on agricultural fields and factory plants running optimally, and NOT in boardrooms, political rallies, business breakfasts and conferences discussing an infinite great deal of nothing.

    1. Very true, right to the point. So long the fundamentals which drove away
      our Zim dollar are not in place (i.e exports driven economy); we are moving in a circle

    2. very analytical Buxton keep it up my brother.they did not learn ,they pretend to have seen nothing from our previous crisis .they must return to basics our crisis is not rocket science

  4. The beautiful ones are not yet born

    Everyone knows that the fundamental problems in the economy lie in a lack of production, insatiable government appetite, economic mismanagement and our toxic politics. What is important to realize is that there was limited improvement on the production front simply because you cannot work with the previous 1:1. It disadvantaged exporters and producers. It is therefore a step in the right direction, but it is not the ultimate solution. There has to be work on the other issues especially our politics where we have allowed, in fact encouraged politicians to hold the country to ransom.

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