Minister of Finance and Economic Development Mthuli Ncube has said that the government will protect people’s savings by preserving the value of real-time gross settlement (RTGS) bank balances at an exchange rate of 1:1 to the United States Dollar.
However, while giving a presentation at Chatham House in the United Kingdom, Ncube admitted that Bond Notes (and RTGS ) are not equal to the United States dollar.
The minister said that he was not going to argue with the market on this matter and suggested that bond notes will need to be demonetized at some point in the future.
The Ministers’ new position seems to be in line with Reserve Bank of Zimbabwe (RBZ) governor John Mangudya who said that it would be suicidal to allow the market to determine the exchange rate.
We publish the statement below in full:
THE NEED FOR ECONOMIC AND CURRENCY REFORMS
Further to the various measures that Government is putting in to accelerate economic reforms that are necessary to right-sizing the economy, it is critical to restate Government’s great commitment to reducing fiscal imbalances which are the root cause of the many challenges the economy is facing.
The challenges include cash shortages and the proliferation of foreign exchange parallel market rates which have a negative effect on prices. These challenges require that Government position the economy on a strong footing by implementing reforms that include cutting on government expenditure, working towards import parity pricing system, increasing efficiency on government delivery systems and fast-tracking the State Owned Enterprises reforms, among a host of reforms.
These reforms shall be accompanied by a strong and sustainable currency reform system which will follow after the execution of the above reforms. This is necessary to ensure that any currency reform programme that the Government would put in place is effective and that it has minimum disruption to the business.
Accordingly and in view of the need for an orderly currency reform programme that will be followed when the economic fundamentals are right to do, the country shall continue to use the multi-currency system which was put in place by Government in 2009. This system entails that foreign exchange earners are not prejudiced of their regulatory foreign exchange receipts and that those who do not earn foreign exchange have access to foreign exchange through the banking system as is per the current policy of foreign exchange management system. In parallel, the Reserve Bank shall continue to maintain adequate resources for the import of essential commodities.
Over and above the Nostro Deposit Protection Guarantee from Afreximbank, we are also reinforcing Nostro foreign currency accounts with a statutory instrument to guarantee that these are private deposits, and neither the Reserve Bank nor government has any access to them.
Government recognise concerns surrounding RTGS deposits, and we commit to preserve the value of these balances on the current rate of exchange of 1 to 1, in order to protect people’s savings.
Hon. Prof. Mthuli Ncubc
Minister of Finance anti Economic Development
10 October 2018