Government has assured pensioners that they will not lose their savings following the floating of the exchange rate and introduction of the new RTGS dollars as legal tender.
Presenting the 2019 Monetary Policy Statement last month, Reserve Bank of Zimbabwe (RBZ) governor John Mangudya said they denominated the existing RTGS balances, bond notes and coins in circulation as RTGS dollars in order to establish an exchange rate between the current monetary balances and foreign currency.
Appearing before the combined Public Accounts Committee (Pac) and Budget, Finance and Economic Development Committee, Mangudya said denominating RTGS balances, bond notes and coins alone will not erode pension savings, adding that inflation will do so.
“Having an exchange rate does not reduce value. Value will be retained through taming inflation. We need to preserve value through taming inflation, which erodes people’s value,” Mangudya said.
“Inflation in Zimbabwe has been going up because of the effects of street exchange rates.
“By opening up the economy, we believe that the official rate of exchange will remain within an acceptable range thereby taming inflation by targeting monetary base.
“All inflation is caused by increased money supply. We will preserve pensioners’ value by making sure inflation does not go through the roof, which is our mandate,” he added.
He also said value will be preserved through increased productivity and confidence in the market.
Mangudya urged insurance companies to preserve value through investing in inflation-linked products.
“When they have inflation-linked products, they will increase the amount which they pay to the pensioners on a monthly basis.
“By so doing, they will be protected from inflation,” he said, adding that he has since met with the Insurance and Pensions Commission to address the issue.
Committee members accused the central bank of enriching pension insurers at the expense of contributors.
They demanded to know the compensatory measures put in place by the central bank to protect policyholders whose funds have depreciated are since the demonetisation of the bond note.
They said there was need for government to guide insurers through policy pronouncement to influence them in formulating compensatory arrangements for policyholders.
“People lost value before and according to Justice Smith inquiry into insurance and pension funds, $5,68 billion was lost,” Pac chairperson Tendai Biti said.
When the country dollarised in 2009, pensioners lost their life savings, with some starting afresh.