Monetary Policy Statement 2019: What the experts said

The Reserve Bank of Zimbabwe (RBZ) governor John Mangudya presented the much anticipated Monetary Policy Statement (MPS) Wednesday. The MPS was met with mixed feelings from across the political divide.

Here is a look at what some captains of industry, economic analysts and politicians had to say about it.

Zimbabwe National Chamber of Commerce chief executive Sifelani Jabangwe

He said government‘s move to officially recognize the value of Real Time Gross Settlements(RTGS) was a significant step towards Zimbabwe’s path to economic recovery:

“For us as business this is really what we have been asking for .

“So basically to an extent you can say that this government is listening to the concerns of businesses, so essentially we requested this and we communicated to the government that we needed legal access to foreign currency and this was government’s response.

“Previously businesses were going to the black market to access funds for raw materials so now we no longer have to do that,” he said.

“We also believe it is a step to normalise ways of running an economy. Government has acknowledged that the RTGS is a local currency that value is around 3.5 to the [United States Dollar],” he said.

“It is a tool, it is one of the mechanisms which we [will] use in the economy but it has to be supported by other issues such as ensuring that we increase our production, we increase our exports and that government does not overspend, in other words it maintains fiscal discipline.

“It will reflect the behaviour of the economic agents. In other words if we do not behave in ways that promote economic development the rate will go the wrong way,” Jabangwe said.

Economic analyst, Vince Musewe

Musewe described that government holding on to the 1:1 premise as a “mess” and emphasized that now government should focus on “capital formation” through investing in industry and infrastructure:

“The government is no longer a player in that system that will be allocating money resources to industry, the market is now going to do that.

“That [previous approach] introduced some inefficiencies as we know that there was a board of people at the Reserve Bank deciding who gets what and now the market will determine that and that is what we want,”

Musewe said getting the government to be a key investor in the economy is “the other leg of the transaction.”

“This is a process, it is not an event, the market has been asking to be liberalised, they have done that but we need to know that everything has its unintended negative consequences which we have to manage,” he said.

“We wanted a liberalized foreign exchange market, everybody even opposition [parties] anyone who is an economist worth his salt has been calling for that so it is a positive step,” Musewe added.

In contradiction to Musewe’s submissions, opposition party MDC Alliance leader Nelson Chamisa posted on Twitter:

“THE MONETARY POLICY STATEMENT is a disaster that will erode livelihoods, plunge the nation into darkness & uncertainty. The nation was misled that bondnote was equal to USD. Not good enough to simply wake up to say the same are now no longer equal, minus apology & compensation.!

Political analyst, Alex Magaisa seemed skeptical and registered his views via Facebook:

He wrote:

“Interestingly, the government maintains the forex allocation scheme, itself a haven for

rent-seekers unless it is open and transparent, something that has been lacking in the past. The new forex allocation committee will have to be transparent and robust in its role.

Since the government is probably the biggest consumer (and allocator) of forex, its appetite and conduct will have the biggest impact on the rates of exchange between the RTGS Dollar and the USD.

Magaisa said exporters would lose out because of the forex retention scheme:

“For example, a tobacco farmer is allowed to retain 30% of export proceeds in USD, while a tobacco merchant retains 80%.

“In other words, the policy rewards the middleman over the grower. It privileges capital over labour. It is better to be a middleman than a primary producer,” he said.

“No doubt growers will not be happy & middlemen will be smiling all the way to the bank,” Magaisa speculated.

Agribank chief executive officer Sam Malaba was more optimistic on the issue of exports:

[Mangudya] 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 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,’ he said.

Economic analyst, Ayanda Nyanga said the statement was a step in the right direction as now about $600 million United States Dollars in RTGS could now be unlocked, despite government being on the backfoot:

“This is nothing new, it is what we have been asking for quite sometime, people have been using RTGS as the local currency for three to four years now, the RBZ was acting as a forex supplier for businesses as we saw with Delta which was not sustainable, it kept leading to shortages,” he said.

“This should mean that shortages are a thing of the past as businesses should be able to access adequate forex for materials and supplies,” he said.

Industrialist and United Refineries Ltd Chief Executive Busisa Moyo was apprehensive about the condition stated that forex holdings for exporters will be liquidated within 30 days at the market rate for the day :

“The only move that I feel was not correctly analyzed 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,” he said.

Economist Ashok Chakravati seemed to have nothing but praise for the new monetary policy:

“It is a request that has been in the works for many months by companies. It is a sign that this is a listening government and also a listening central bank,” he said.