RBZ calls for Zimdollar pricing
Reserve Bank of Zimbabwe (RBZ) Governor Dr John Mangudya has implored public entities including local authorities to price their services in local currency.
Speaking at the ongoing 2022 pre-budget seminar in Victoria Falls, Dr Mangudya said Government had also extended lines of credit to fuel dealers in local currency to promote its usage and reduce abuse of citizens by unscrupulous dealers.
“We need to promote use of local currency and we encourage public entities to price their services in local currency. We encourage local authorities to price in local currency so that we create demand for our money.
“We have increased Letters of Credit for fuel in local currency working with Zera and Ministry of Energy and Power Development to ensure that we place a system which will not be abused,” he said.
Dr Mangudya was responding to questions from legislators after presenting a paper on, “Monetary Policy complementing Fiscal Policy towards Vision 2030: Implications on the 2022 national Budget”.
He also said inflation will continue declining to lower single digit levels by December 2022, a move that will assist in value preservation and guarantee certainty in budget allocations. Dr Mangudya said the RBZ will continue to take appropriate measures to ensure that foreign currency allotments were settled timeously and will pursue a strict
monetary targeting framework to ensure that money supply does not destabilise the exchange rate.
He said the bank will also ensure that truant behaviour in the economy was minimised.
“(We will) support domestic savings in local currency through instruments that compensate local currency depositors for potential exchange rate depreciation; encourage banks to set appropriate interest rate margins for savings and time deposits to improve the appeal of the Zimbabwean dollar as a value preservative currency and continue to
encourage banks to streamline bank charges to stimulate foreign currency deposits by the banking public,” Dr Mangudya added.
He said foreign currency receipts between January and September this year amounted to US$6,09 billion compared to US$4,43 billion over the same period in 2020, representing a 37,8 percent increase.
Money supply has remained under control with liquid financial assets in local currency equivalent to US$1 billion against foreign currency holdings of about US$4,5 billion, comprising US$1,2 billion reserves under RBZ; US$1,7 billion FCA deposits in the banking sector and estimated US$1,5 billion circulating in the economy.
Dr Mangudya said there had been no recourse to central bank financing of deficit since last year due to continued fiscal sustainability. He added that Vision 2030 calls for complementarity of fiscal and monetary policy to create a conducive environment characterised by low and stable inflation, stable exchange rate and high economic growth
rates.
Those objectives will need to be tackled from both the fiscal and monetary policy sides.
“The ongoing complementarity between fiscal and monetary policy has created accommodative monetary and financial conditions supportive of the strong economic rebound to 7,8 percent this year and above 5 percent in the outlook period,” he said.
“On the fiscal side, Government has managed to achieve fiscal sustainability. On the monetary side, the Bank has managed to stay the course of conservative monetary targeting framework.”
Monetary and fiscal policies work well in normalising the economy, said Dr Mangudya, hence the need to find solutions to formalise the informal sector because the country has more of its economy in the informal sector.
“Government needs to think about how to formalise the informal sector because (the) Budget only focuses on the formal side. We need to promote loans in foreign currency so as to tap more into Diaspora, that’s a good proposal which we can achieve with confidence and unity of purpose.
“We agree with the issue which says we need to provide loans in foreign currency to tap into the Diaspora and we are doing that, and we are going to expand,” he said.-The Herald
