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WE report elsewhere on these pages of the International Monetary Fund Staff Monitored Programme’s assessment of the impact of monetary policy reforms implemented by the Reserve Bank of Zimbabwe in February.
Among the key findings of the IMF is that Zimbabwe has managed, through the currency reforms, to contain the deep-seated economic distortions of the previous administration under former president Robert Mugabe.
It notes, however, that more implementation is needed going forward.
The IMF said the exchange rate on the parallel forex market narrowed sharply after the currency reforms, but has since widened again with few trades occurring beyond the limited sales by the Reserve Bank of Zimbabwe (RBZ).
“The currency reform introduced in February 2019 has reduced the deep economic distortions of the previous system, but more effective implementation is needed.
“The premium in the parallel forex market narrowed sharply after the currency reform, but has since widened again with few trades occurring beyond the limited sales by the RBZ,” it said.
While volumes in the market could pick up as confidence was gained in the new policy framework, the IMF said monetary authorities should also consider options to encourage a greater supply of foreign currency into the market as well as maintaining the existing exchange controls to constrain demand for the time being.
“Staff (IMF) encourages the authorities to increase their foreign currency reserves when conditions permit, to provide a greater reserve cushion and to smoothen exchange rate changes during lean periods of forex inflows (that is towards end of the year),” it said.
The multilateral institution said given the financial sector risks and vulnerabilities, steps to support financial sector stability were a priority.
We find the IMF assessment report quite positive and encouraging given the current upheavals on the market.
What is revealing about their findings is that the spike in parallel market rates is temporary with the rate expected to plummet once the interbank market is adequately capacitated and operating at optimum capacity.
What is critical is for Government to continue on its reform path and strengthen its institutions such as the interbank market.
There is a need to eliminate all forms of rent seeking behaviour and corruption in the financial sector so that the economy can have a fighting chance of rebounding.
Nine months after the launch of the Transitional Stabilisation programme, Government has notched some successes.
It has eliminated the fiscal deficit — the main driver of inflation and a ballooning domestic debt under the First Republic.
From a position where the country held about US$200 million in private nostro accounts, that figure is now closer to US$1 billion — a remarkable feat.
The interbank market, which is still in its infancy, needs to be fine-tuned and capacitated so that it kills off the parallel market.
The problem is that there are cartels and big firms that used to benefit from the chaos and opaque system of the previous order where the RBZ used to allocate foreign currency using a rate of US$1:1 RTGS.
These groups are frustrating the full implementation and functioning of the interbank market for their selfish ends.
A smooth migration to the interbank system spells doom for these merchants of darkness because they can’t access cheap money from the Government and trade it on the parallel market.
It is now crystal clear that the Government needs to be ruthless in its dealings with these saboteurs because the nation cannot be held to ransom by a few greedy individuals.
This corrupt web of speculators and parallel market wheelers and dealers is holding the entire country back.
In that regard, we are glad that Government is coming down hard on corruption as exemplified by the prosecution of some bigwigs in a parastatals such as Zinara.
We also note with appreciation the fact that authorities are not stopping at nailing these corrupt sharks through the courts only but are going after their ill-gotten wealth with a view to recovering some of the stolen loot. I
t is astonishing that parastatals such as Zesa and Zinara were being creamed off by their executives in broad daylight.
We aver that an example should be made out of these criminals. Zimbabwe can only prosper when the corrupt system which brought this country to its knees is dismantled.
The TSP and other policies Government is rolling out are excellent blueprints but they should be supported by clean, fair, ethical business practices which unfortunately are desperately in short supply in Zimbabwe.
As Treasury slowly trudges ahead with the painstaking work of reforming the country’s economy, there will be pain and agony along the way but ultimately Zimbabwe will work again.
Government’s immediate priority should be the elimination of all forms of corruption so that its economic policies gain traction.
It helps that it is embarking on this perilous journey with the assistance of the IMF which is providing valuable guidance.
Bongani Ndlovu
Online Reporter