The Reserve Bank of Zimbabwe governor Dr John Mangudya said the only solution to the country’s economic challenges is to increase production and craft policies that boost the productive sector.
Mangudya made the remarks on Monday when he appeared before the Parliamentary Public Accounts Committee hearing to discuss Zimbabwe Assurance Management company (ZAMCO) debts, government overdraft facility with RBZ and value of bond notes.
“The solution to all of Zimbabwe’s challenges lyes in productivity and confidence. Everyone needs to work hard, not just talk,” said Mangudya.
The governor emphasized the success of the bond note despite its widespread criticism.
He heaped the blame on excess government expenditure and said the surrogate currency (bond note) pushed up exports as it was initially designed to do.
“The bond note did not fail, it was an export incentive and it pushed exports.
“What failed is the economy, due to excess government expenditure. We now had excess funds in the economy and couldn’t maintain parity between the bond note and United States dollar,” he told the committee.
The governor said the bond note was largely affected by lack of production.
“We are where we are today because our production is low. We cannot feed ourselves. We have to survive on imports,” said the apex bank boss.
Mangudya also highlighted that government workers should not be expecting an salary increment anytime soon since there is no production in the country.
Civil servants have been demanding higher salaries since October but the government has been dragging its feet in honouring the demand.
“This economy does not have the capacity to sustain higher salaries/wages than are currently obtaining because there is no production,” he said.
The committee’s chairperson Harare East legislator Tendai Biti asked why the RBZ has been making policies that were imaginary and unrealistic.
He asked why government was not using the ‘black market’ rate in relation to export retention for tobacco farmers.
“I think it will be wrong for the bank to purchase export retention United States dollars from our exporters at the fixed rate at the moment which is 1: 2,5 when the market is 3,5. Can you give us confidence that you will purchase at the street rate. If that is not the case why not just liberalise,” asked Biti.
In his response, Mangudya said the economy cannot be run or influenced by ‘street rates’ and he also revealed that tobacco farmers will have 50 percent forex retention.
“In terms of tobacco it is not 30 percent retention, it is 50 percent of the net proceeds. We met the tobacco industry, gold and merchants. We agreed at 50 of the net proceeds to be in their nostro accounts and we want them to open nostro accounts, so that we do not consume from cash. We want people to use bank accounts. The way it will happen is very simple. On the day of the auction, merchants will bring foreign currency into Zimbabwe, tobacco will be sold in RTGS dollars and then they will get their US dollar, they will get their money from nostro money and RTGS dollar,” explained Mangudya.