I do not envy Finance and Economic Development Minister Professor Mthuli Ncube and the Reserve Bank of Zimbabwe Governor Dr John Mangudya.
The two gentlemen must be having a torrid time.
On one hand, fingers are pointing at them for “failing” to stabilise the local currency which has been sliding on the parallel market at such a rate while on the other they are having to contend with a stubborn black market gang that is refusing to budge and has gone rogue.
The tug of war has been going on for some time and it has ceased to be funny.
All eyes are on the monetary and fiscal authorities to wave the magic wand and restore the value of the local currency, to win a war that has haunted the economy for some time and has actually become more vicious over the past few months.
The Zimbabwe dollar has been subjected to relentless bashing that has left it trading at an average 800 to 1 United States dollar as of yesterday, and is threatening to sink further.
But questions that boggle the mind are: Who or what determines the daily rate on the illegal market?
What considerations are at play?
Is the black market that complicated to the extent that its bubble can’t be burst?
Who is benefiting from all this to the extent of sacrificing the economy and the generality of Zimbabweans through such greed?
What does it take to bring all this to a stop?
On an ordinary day, it should have been a complex situation with no easy answers to these questions but they beckon.
At some point early this year, the Zimdollar appeared to be holding its own, stabilising somewhat from the time the foreign currency auction market was introduced in 2020.
However, without warning it began to slide and appears to be on a free fall.
This is hurting the economy in many ways, most of which we have interrogated here before.
The bottom line is that the black marked needs to be subdued so that stability can return.
A number of interventions have been employed and we believe the situation will give sooner rather than later.
Let’s take a look at some of the measures employed by the two gentlemen via the institutions they represent.
l The RBZ banned third country foreign payments for imports, except for fuel, to encourage remittance of export proceeds
l The central bank has also adopted tighter (Hawkish) monetary policy stance, which has seen quarterly money supply growth whittled many times from 22.5 to 0 percent presently.
l It has hiked bank policy rate, the benchmark for all commercial lending by banks, from about 50 percent in 2021 to 200 percent to stymie speculative borrowing
l Increased statutory reserve thresholds to limit amount of liquidity flow into the market, which is used to attack the currency
l Introduced the Auction, which has disbursed over US$3,3 billion since inception in June 2020, for improved access to forex, market led exchange rate determination and reduce black market activities
l Limits introduced on mobile money transfers and tightened regulations governing same to squeeze channels used to conduct parallel market trading and attacks on domestic currency
l Bureaux de change established to widen formal market for currency trading, including by individuals and for small value transactions
l Introduced interbank forex trading to allow more liberal forex trading to engender confidence and close gap between official and parallel market exchange rate
l Government now pays 50 percent of contracts for critical public infrastructure programmes in foreign currency to reduce local currency liquidity flows into the market.
l Treasury has spread out local currency payments for public infrastructure projects to manage money supply growth.
l Treasury entrenched multi-currency, chiefly USD and Zimdollar, regime into law to grow confidence. It is for the duration of the National Development Strategy whose first phase ends in 2025.
l Legislated local currency pricing system based on the interbank rate, for which margins can only be up to 10 percent above the ruling interbank rate.
l Allowed payment of duties and taxes, including up to 50 percent of royalties, and other statutory payments in local currency to promote wider use and desirability of the Zimdollar.
l Introduced 4 percent tax on USD transfers to encourage increased usage of local currency in domestic transactions.
l Minimum vesting period of 180 days on stock market Investments to plug loopholes for arbitrage and speculative trading, also tightened administrative conditions for stocks trading, including banning opening of and transfers between sub-accounts
The recent introduction of gold coins, set to be issued this week, is also expected to mop up excess liquidity in the market thus engendering stability.
Debate continues to rage regarding other possible interventions to bring stability to the currency market. Zimbabwe must not lose the gain achieved in the economy since the coming in of the Second Republic.
Last year the economy grew by 7,8 percent and hopes were high a GDP growth of 5,5 percent would be achieved this year.
However, the rising inflation currently being experienced threaten to put these targets off radar. This sharp price increases have affected households and business but Government remains resolute this will be tamed soon.
Engagements between the Government, business and labour under the Tripartite Negotiation Forum are expected to yield results but it is important that all parties become alive to the urgency of the matter,
Zimbabwe cannot afford a reversal of gains made over the past few years. It took much to achieve the gains after decades of challenges.
The onus is on every Zimbabwean, particularly those that have made their occupation to determine parallel market rates, to sober up and see the benefits to all, of a stable local currency.
A critical meeting of minds is necessary at this juncture. Prophets of doom and enemies of progress are spoiling for further deterioration of the Zimdollar but we believe the illegal market will give soon.
In God I Trust.