Govt urged to create currency board

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The Reserve Bank Governor (RBZ) governor John Mangudya has on Wednesday afternoon filed a RTGS$1 million lawsuit against ZANU PF youth league leaders Pupurai Togarasei and Lewis Matutu for defamation damages emanating from a press statement in which they accused him of corruption on Monday.

World renowned economist and financial advisor  to different presidents Steve Hanke has urged the government to decimate the Reserve Bank of Zimbabwe and set up a currency board to curtail the run- away inflation.

“Instead of extending the central bank governor’s term by another five years, Mnangagwa should have mothballed the Reserve Bank of Zimbabwe and replaced it with a currency board which would crush the nation’s inflation and provide unwavering stability,” said Hanke who has been proposing possible remedies to Zimbabwe’s ailing economy lately.

According to Hanke, a  currency board issues notes and coins convertible on demand into a foreign anchor currency at a fixed rate of exchange.

“As reserves, it holds low-risk, interest-bearing bonds denominated in the anchor currency.

“The reserve levels (both floors and ceilings) are set by law and are equal to 100%, or slightly more, of its monetary liabilities.

“So, the domestic currency issued via a currency board is nothing more than a clone of its anchor currency.

“A currency board generates profits (seigniorage) from the difference between the interest it earns on its reserve assets and the expense of maintaining its liabilities,” submitted Hanke who has successfully advised the same model to Argentina,Ecuador and Singapore among other success stories.

Presidential Advisory Council (PAC) member Shingi Munyeza said the central bank was not to blame but the government was responsible for the hyper-inflation.

“Where is the battle, from the bottle mark? It is a legitimacy issue. Do you have the people’s mandate to take them to where you intend?” he said in an utterance that got tongues wagging.

However,financial expert and economist Persistence Gwanyanya contradicted with Hanke’s proposal and said the move to extent the central bank governor John Mangudya’s contract was necessary for continuity sake.

In an interview with the Zim Morning Post this week, Gwanyanya played down the setting up of a currency board but rather lauded the central bank governor for steering the ‘economy ship’ despite of murky waters.

“In as far as Mangudya has been managing the ship; he has to finish what he started.

“Unlike Gono (Gideon) who sank the ship, Mangudya is managing the ship regardless of pressure from different sectors including the government,” said Gwanyanya.

Gwanyanya said excessive government expenditure is crippling the economy and blame is heaped on Mangudya.

“RBZ and Mangudya cannot escape the scrutiny from the public because it is the central bank.

“ Government engages in excessive expenditure, populist and election related expenditure has been crippling the finance. “The government is not responsible,” he said.

The introduction of the RTGS dollar has reduced the severity of controls that drive a wedge between the official and black-market exchange rate.

As of today (Friday) ,the United States dollar is currently trading at 1:5 on the black market while the official interbank rate is 1:3.3

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