‘Restore the value of the US dollar’ | The herald
Prosper Ndlovu Bulawayo’s office
The GOVERNMENT should develop a policy which will influence the behavior of the market with a view to restoring the value of monetary assets in the economy in order to avoid further deterioration of the currency, said economist and consultant Mr. Dumisani Sibanda.
Use of the US dollar under the multiple currency system, adopted since 2009, is rapidly losing value in Zimbabwe given recent price increases and commodity supply constraints due to shortages of currencies. Inflation surging to 2.24% in October from 0.78% in September shocked the market and eroded consumer spending while threatening the value of money.
Mr Sibanda is concerned that this trend, if not corrected, could hamper foreign currency inflows into the economy, especially diaspora remittances. Such a scenario could trigger a crisis in the productive sector and cripple basic supplies, especially as the main source of foreign exchange at the moment, mining, is heading towards a slowdown following the crisis. rainy season, he adds. Although the government has relaxed import regulations to allow those with free funds to import commodities, Sibanda said building stocks alone would not stem the tide of increases. prices.
“This economy cannot afford another depreciation of the currency through depreciation as happened in 2009. What the government needs is a policy that will influence the behavior of the market in view. to restore the value of monetary assets in the economy. The government’s biggest concern should not be inventory availability.
It is a populist approach, its concern should be to retain the value of monetary assets as a primary concern. This can be done through political intervention, âhe said. He said the widening gap in the currency supply and recent price increases would lead to a loss of confidence in the economy, which would hamper investments and foreign currency inflows. Diaspora remittances, for example, have seen a downward trend this year.
In its medium-term monetary policy statement, the Reserve Bank of Zimbabwe (RBZ) reported that international remittances fell an average of 8.4 percent to $ 714 million from $ 779 million in June this year. year. Apex Bank Governor Dr John Mangudya admitted that the decline in the supply of foreign dollars was mainly due to limited access to foreign financing, declining foreign investor confidence, which reduced capital flows and currency leakage induced by indiscipline through illicit transactions and other activities that include rent-seeking behavior.
âThe root cause of the excess demand for foreign currency, on the other hand, stems mainly from the increase in the money supply resulting from increased government spending, money creation – loans and overdrafts – by banks. It is these external and national imperatives or fundamentals that must be taken into account to restore balance and resolve the challenges facing the economy, âsaid Dr Mangudya. In this regard, Sibanda said easing import regulations for a few players without focusing on the loss of monetary value and restoration of it was not sustainable.
âIf free funds are to find interest in Zimbabwe, it cannot be by converting them into shares. The only way to restore the value of money is to increase competition and the only way to do that is to allow households to buy at the family needs level like they did in 2009 to say that when you get goods for family consumption, there is no obstacle. If you do that, you are under the pressure of the formal market, âsaid Sibanda.
âIt’s normal for the retail industry to operate at a depressed level as long as it is making money. They don’t make money by raising prices, but money can be made if you sell for the same price and the value for money is restored. What costs a dollar elsewhere in the region – in Botswana, South Africa or Mozambique, we should buy it for a dollar here. This is what the government should do to say restore the value of foreign currency.
Zimbabwe Confederation of Industries (CZI) chairman Sifelane Jabangwe also expressed reservations about the government’s stance on import regulation for fear of escalating inflation. Mr Sibanda agreed with this view and stressed the need to tackle cost factors instead. He said that as long as prices remain high, people with access to remittance finance will want to hold back because of the premium involved when trading hard currencies on the black market.