RESERVE Bank of Zimbabwe Governor Dr John Mangudyaâs Monetary Policy presented yesterday was quite revealing in so far as it highlighted problems haunting the domestic economy.Â Remarkable, as well, was the fact that the policy did not just identify the multiplicity of problems stalking the economy, but proffered solutions to resolve them for the good of everybody.
The policy touched on the prevailing situation in all sectors of the economy, highlighting the problems and suggesting solutions taking into cognisance the macroeconomic conditions in the country.
Evidently, the policy was quite alive to the issue of resource limitations of the central bank and challenges facing the economy, but did not run short of ideas to try and turnaround the economy. The governor must certainly be applauded for seeking to tackle the troublesome issue of competitiveness. Statistics show that due to lack of competitiveness, many businesses have collapsed.
Dr Mangudya was spot on when he said the uncompetitiveness of local companies was, partly, a phenomenon of rounding up of prices at a time industry is also not able to produce at least cost. As such, he said to enhance competitiveness businesses must round down prices, which had been rounded up after dollarisation on account of acute shortage of change for proper pricing systems.
He said this challenge, which forced consumers to buy items not budgeted for, had been resolved by introduction of small bond coin units, which are backed by a $50 million bond.
However, while a correct pricing system was not the panacea to Zimbabweâs economic problems, the challenge also lay in the cost structure of the manufacturing industry, which is high.
It is against this background that the Governor announced an initiative by the Central Bank to mobilise resources meant to help local companies to procure new machinery and equipment. The policy also went some way in bringing finality to the protracted issue of Zimbabwe dollar balances lost in banks when the country switched over to the use of the multi-currency in 2009. The Governor has set aside $20 million for demonetisation, which he said will bring finality to the issue of the Zimbabwe dollar balances in a development that should instil confidence in banks.
Dr Mangudya said this showed Governmentâs commitment to the multi-currency, which it will only decide to drop when the economy has built sufficient capacity to be able to sustain own currency.
The policy statement also contains commendable measures to improve liquidity needed in economic recovery in so far as it seeks to tap into the rich source of liquidity â Diaspora remittances.
Government will come up with sources of investment such as in tourism, energy and power, agriculture, mining and manufacturing, where funds from people in the Diaspora would be invested.
Recognition of the Diaspora and its potential to contribute to economic recovery should be applauded in light of revelations that $1,7 billion from this constituency found its way into Zimbabwe last year.
The policy also deserves commendation for its emphasis on the need to resolve few cases of liquidity challenges among banks, the issue of non-performing loans and high cost of finance.
According to the policy, Government has also capitalised the RBZ to the tune of $100 million in a development expected to enhance the performance of the apex bank.
In the same vein, the Central Bank will also enhance the liquidity situation of banks after finalising modalities for resumption of interbank market backed by a $200 million facility from Afreximbank.
Further, Dr Mangudyaâs policy deserves praise in terms of its attempt to improve liquidity through measures to ensure recovery of overdue export remittances and expansion of the threshold for which local firms can receive foreign capital without seeking regulatory permission.