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FORMER Reserve Bank of Zimbabwe Dr Leonard Tsumba says current central bank chief Dr John Mangudya should continue to work on public confidence as he bids to introduce bond notes as a medium of exchange. Dr Tsumba, the second black man to steward the bank post independence Zimbabwe, said policy measures that Dr Gono is pursuing are reasonable, in light of limited options to cash shortages.Dr Mangudya announced recently a cocktail of measures aimed at addressing a biting cash and liquidity crunch that became so pronounced in the last two months, especially end of last month.
Apart from resolving the cash and liquidity constraints, which has also put significant pressure on nostro accounts, policy interventions are meant to stimulate economic and export growth.
Speaking in an interview with The Herald Business after his company’s annual general meeting, the Dairibord chairman said the RBZ’s bond notes anchored measures are a reasonable initiative.
“It is a reasonable intervention, it is innovative, otherwise what else can he do (in the circumstances). I would also say that he needs to continue to work on (the public) confidence,” Dr Tsumba said. “If I have more specific recommendation I will go straight to him.”
Dr Tsumba was the RBZ governor between 1993 and 2003 when he passed on the mantle to Dr Gono whom incumbent central bank chief Dr Mangudya replaced in May 2014. The central bank’s first black governor was Dr Kembo Moyana.
Plans by the central bank have been met with derision in some quarters and palpable lack of confidence in the initiative amid fear that this is an attempt to “smuggle back” the local currency.
But Dr Mangudya said Government and the central bank will not be irresponsible to reintroduce local currency any time soon because the economic fundamentals are “just not right yet”. Prevailing cash shortage and tighter liquidity situation come against a situation where Zimbabwe’s imports remain too high relative to exports while increased gold production by small scale miners, and attendant payments have exerted more pressure.
This has also coincided with the global commodity price slump period, which has seen earnings from the country’s predominantly raw commodity exports taking a huge knock in the process.
According to the RBZ, the cornerstone of economic development is production of goods and services, as such, sustainability of the multi currency system in Zimbabwe is dependent on the economy’s capacity to generate enough hard currency.
Online Reporter