Munyaradzi Wekwa Chivi
Reserve Bank of Zimbabwe Governor Dr John Mangudya should honor his words and resign because he has failed to maintain the value of the country’s local currency. The Governor promised the nation that bond notes were going to work when he introduced them. But the reality on the ground is that the money has become so worthless that even the recently released ZW$10 dollar note, and the yet to be released ZW$20 dollar note cannot buy a single loaf of bread.
Last week, the Governor exposed himself as a clueless person when he admitted in Parliament that he does not know why the value of the local currency is eroding on a daily bases, blaming it on demons. This shows that we have a person who does not know what to do at the helm of the central bank which is a bad sign. The country needs a Governor who can craft sound monetary policies for our local currency to maintain its value, not someone who pleads with the country to pray for the economy at a time where currency fundamentals are needed.
There is no doubt that seeking divine intervention is needed in solving problems. But the interventions need the backing of sound monetary policies if they are to work. The printing and releasing of new money without production to back it was a wrong move. We saw how the introduction of ZW$10 dollar notes heightened inflation in the country last week. The local currency lost its value to a point where US$1 was trading at ZW$75 on the parallel Forex exchange market. This led to the sharp increase of the prices of commodities as manufacturers and retailers where chasing the value of the U.S dollar.
Mangudya is the one responsible for the booming of the black market. He precipitated it by introducing fixed exchange rates in the Interbank exchange market. The move literary closed the formal market as companies flocked to the alternative market for better Forex exchange rates to get more value for their money. This caused a major rise in the demand and supply of Forex in the black market, resulting in high rates.
Instead of correcting his ill-advised move, the Governor is going after Ecocash accounts and creating unnecessary inconveniences to the transacting public and Businesses. The Governor blames these agents for the black market and the selling of cash premiums, a problem which traces its roots back to the central bank. He doesn’t want to admit that the central bank’s failure to inject enough cash and Forex in the formal system is the reason why people are charging premiums and using mobile money platforms for Forex trade. All these problems cannot be solved by closing these platforms because the cash and Forex shortages will remain.
The fixed exchange rates are affecting Tobacco farmers. They worked hard but all their handwork is coming to nothing because the central bank fixed the exchange rate in the formal market. After the handwork put in by the farmers, does it make sense for them to lose money to the system through official method like fixing the rate? Does the market reality reflect the fixed exchange rate? Why punish the productive farmers? Such decisions obviously lead to the diversion of the tobacco from official markets. Farmers will obviously source unofficial markets to sell their tobacco produce for better profits.
The RBZ must introduce a floating exchange rate and a free forex trading platform without unnecessary regulations. Let people buy and sell forex freely through formal platforms. Zimbabwe has a lot of forex, but there are no formal and efficient trading platforms. The country needs these in place if the government is to have control over forex exchange.
The Government must focus on collecting taxes and redistributing them for the provision of public goods instead of suffocating the markets. Command Economics have failed and will never work. Zimbabwe needs a free market economy that rewards those who dare to work hard. Entrepreneurship is now a course at our tertiary institutions and it must be rewarded not punished! There is absolutely no need for fixed exchange rates or price controls. Let the market be free from unnecessary governement controls!
We need good policies that encourage economic growth. Unfortunately, the actions of Dr Mangudya have seen the country failing to have consistent policies in its financial sector. Things get worse every time he speaks or introduces a policy. This only shows that he is not fit for the job. He should do the honorable thing and resign as he promised.