Editorial Comment
RESERVE Bank of Zimbabwe (RBZ) governor John Mangudya is today expected to present the Monetary Policy Statement (MPS) amid reports of a widening rift between him and fiscal authorities, as differences emerge on how to manage the country’s currency crisis.
Traditionally, the governor delivers the MPS towards the end of January, but it has had to be postponed as monetary authorities and Treasury fail to agree on how best to address deep-seated currency challenges, which have crippled business in the investment-hungry southern African nation.
In his last MPS, Mangudya directed local banks to separate hard currency deposits from real time gross settlement balances, inadvertently admitting that the two were not of equal value.
The move unnerved the market, resulting in accelerated price hikes and shortages of basic commodities.
Since then, the economy has been on a downward spiral, reminiscent of the tumultuous period the country went through in the decade from the turn of the millennium.
The few ambers of hope, which had begun to glow following the fall of long time ruler Robert Mugabe, are fast being stubbed out, as confidence in government’s capacity to deal with the economy is rapidly falling.
The cost of living is increasingly going beyond the reach of most Zimbabweans and local businesses are folding, while foreign investors are pulling out of the market in droves, as the currency situation has curtailed the capacity of shareholders to repatriate dividends out the country.
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An estimated half a billion dollars in dividends is stuck in the country.
Several airlines have also pulled out of the country because of the currency crisis.
Output in the gold sector which, alongside tobacco production, has been the country’s mainstay, has also taken a serious knock, as the currency crisis continues to threaten operations.
The tobacco industry, which generated most of the country’s foreign earnings in 2018 after reaching a record of 252 million kilogrammes, is also at risk of collapsing if the currency crisis is not addressed.
The country is at a crossroads and the MPS will be the most important policy directive set to determine whether the country will sink or swim.
While it is a widely acknowledged fact that the country is certainly not ready to have its own currency, because the economic fundamentals are simply not in place, we can only hope that the governor has taken heed of warnings from industry and analysts who have unequivocally insisted that maintaining the bond note was no longer sustainable and in incapacitated to go on for much longer.
