One of the most burning questions was currency reforms, especially exchange rate liberalisation. Although Ncube wanted the currency reforms, including freeing the exchange rate, IMF and RBZ officials expressed discomfort on the timing and sequencing of the measures, cautioning that if this was done without prerequisite fiscal and monetary interventions it could intensify market turmoil and economic destabilisation.
Ncube yesterday abandoned his currency reform plans as he maintained the unsustainable myth that local quasi-currencies — the Real Time Gross Settlement, bond note and mobile money transfers — were trading at par with the United States dollar.
He also kept the multi-currency system amid attendant contradictions writ large which will almost certainly fuel the parallel market and arbitrage. Flaws and inconsistencies were apparent in his budget speech on currency matters as government took the lead in re-dollarising by demanding duty on some imports in foreign currency, while restricting other players in the economy from charging in foreign currency. In their early October monetary and fiscal policy interventions, Ncube and RBZ governor John Mangudya separated foreign currency (US dollar) and local quasi-currency accounts, virtually acknowledging the currencies were not at par; a move interpreted by the market as de-dollarisation. Ncube’s move to charge duty on some products in forex effectively indicated re-dollarisation, although grey areas remain. Sources said Ncube had been privately communicating with IMF and RBZ officials on the currency issues, mainly the exchange rate reform bid, but was told that his timing may be catastrophic. That and the current turmoil, sources said, forced him to abandon his currency agenda.
Although Ncube and some business executives in Zimbabwe think removing foreign exchange controls and freeing the exchange rate would deal with market distortions and forex allocation bottlenecks, IMF and RBZ officials said this move without the required fundamental support measures — structural reforms, external funding, and reducing foreign deficit and monetary expansion —will not yield the desired results. Sources while the IMF – advocates of the Washington Consensus which emphasises free market reforms and removal of economic controls – and RBZ know that fixing the exchange rate in the face of external shocks without the prerequisite supporting fiscal and monetary measures will result in an overvalued exchange rate and exert pressure on the balance-of-payments, they want Ncube to sequence the reforms to avoid a calamitous big bang approach.
Zimbabwe is facing a very serious economic meltdown, one that has been going one now for over 15 years, and is causing heartbreaking human misery and deaths. We need to address the corruption, mismanagement and lawlessness; the root causes of our economic problems as exemplified by the wholesale looting of diamonds going on in Marange, the waste of millions of dollars sending chefs outside the country for their health needs whilst local hospitals are starved of funds and the rigging of recent elections. There will never be any meaningful economic recovery whilst the criminal waste of human and material resources through corrupt, etc. continues untouched.
The celebration of the removal of Mugabe last year was premature as the Mnangagwa regime has turned out to be just as corrupt, incompetent and tyrannical. All the promises of democratic renewal were just hot-air!
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One of the most burning questions was currency reforms, especially exchange rate liberalisation. Although Ncube wanted the currency reforms, including freeing the exchange rate, IMF and RBZ officials expressed discomfort on the timing and sequencing of the measures, cautioning that if this was done without prerequisite fiscal and monetary interventions it could intensify market turmoil and economic destabilisation.
Ncube yesterday abandoned his currency reform plans as he maintained the unsustainable myth that local quasi-currencies — the Real Time Gross Settlement, bond note and mobile money transfers — were trading at par with the United States dollar.
He also kept the multi-currency system amid attendant contradictions writ large which will almost certainly fuel the parallel market and arbitrage. Flaws and inconsistencies were apparent in his budget speech on currency matters as government took the lead in re-dollarising by demanding duty on some imports in foreign currency, while restricting other players in the economy from charging in foreign currency. In their early October monetary and fiscal policy interventions, Ncube and RBZ governor John Mangudya separated foreign currency (US dollar) and local quasi-currency accounts, virtually acknowledging the currencies were not at par; a move interpreted by the market as de-dollarisation. Ncube’s move to charge duty on some products in forex effectively indicated re-dollarisation, although grey areas remain. Sources said Ncube had been privately communicating with IMF and RBZ officials on the currency issues, mainly the exchange rate reform bid, but was told that his timing may be catastrophic. That and the current turmoil, sources said, forced him to abandon his currency agenda.
Although Ncube and some business executives in Zimbabwe think removing foreign exchange controls and freeing the exchange rate would deal with market distortions and forex allocation bottlenecks, IMF and RBZ officials said this move without the required fundamental support measures — structural reforms, external funding, and reducing foreign deficit and monetary expansion —will not yield the desired results.
Sources while the IMF – advocates of the Washington Consensus which emphasises free market reforms and removal of economic controls – and RBZ know that fixing the exchange rate in the face of external shocks without the prerequisite supporting fiscal and monetary measures will result in an overvalued exchange rate and exert pressure on the balance-of-payments, they want Ncube to sequence the reforms to avoid a calamitous big bang approach.
Zimbabwe is facing a very serious economic meltdown, one that has been going one now for over 15 years, and is causing heartbreaking human misery and deaths.
We need to address the corruption, mismanagement and lawlessness; the root causes of our economic problems as exemplified by the wholesale looting of diamonds going on in Marange, the waste of millions of dollars sending chefs outside the country for their health needs whilst local hospitals are starved of funds and the rigging of recent elections. There will never be any meaningful economic recovery whilst the criminal waste of human and material resources through corrupt, etc. continues untouched.
The celebration of the removal of Mugabe last year was premature as the Mnangagwa regime has turned out to be just as corrupt, incompetent and tyrannical. All the promises of democratic renewal were just hot-air!
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