Zimbabwe Central Bank Chief talks up currency reforms

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John Mangudya – Zimbabwe Reserve Bank Governor

Zimbabwe’s currency reforms will include measures to bring harmony between money in banks or Rapid Transfer Gross Settlement (RTGS) balances and foreign currency resources on the market, Reserve Bank of Zimbabwe (RBZ) Governor John Mangudya has said.

Dr Mangudya said this in an interview with State media on the sidelines of an African Development Bank (AfDB) Zimbabwe private sector round-table meeting this week.

According to the central bank chief, currency reforms are not an overnight event, but a continuous process.

Zimbabwe, Dr Mangudya said, does not have a currency crisis, but a shortage of foreign currency, which he defined as a mismatch between the foreign currency the country is currently generating and demand.

His comments come as companies, holding US dollar denominated bank balances, are struggling to make external payments for raw materials and machinery. Last week, President Mnangagwa said Zimbabwe would prioritise the question of currency reforms to address cash shortages after the July 30 elections.

“On cash availability, when the Zim dollar collapsed in 2008 and we adopted a basket of currencies, both the USD and (SA) rand were at 40 percent each in terms of usage, but US dollar became more dominant and we have no control over the US dollar so we now have to find a way to create our own currency,” he said at a rally in Bulawayo last week.

Certain sections have taken this to mean that the Zimbabwe dollar is primed for an immediate return.

But Finance and Economic Planning Minister Patrick Chinamasa and Dr Mangudya are on record saying that a local currency will only be introduced once the country has achieved the macro-economic fundamentals or conditions that will allow its use.

Dr Mangudya said the talk about currency reform in Zimbabwe pertains to what is currently obtaining in the economy, which is a sharp mismatch between the cash available in banks and the RTGS money.

“We are talking about what is currently pertaining in Zimbabwe, meaning that we need to say, for example, we have more RTGS money in the banks than the real foreign currency in the market. We need to make sure that those two things talk to each other,” he said.