Chronicle Editor
Michael Magoronga, Midlands Correspondent
ECONOMIST and former legislator, Mr Eddie Cross, says the resurgent inflationary pressures being experienced in the market are unjustified given that all the economic fundamentals for a sound economy are in place.
Commenting on the recent move by the Reserve Bank of Zimbabwe (RBZ), which has come up with new measures to curtail the inflation, Mr Cross said there was no justification for the prevailing parallel market inflation rates and warned that Zimbabweans involved in such illicit deals were creating their own problems.
“There is no reason for this inflation in Zimbabwe given that all economic fundamentals are solid. I think the key issue is how to establish the exchange rate, which clears the market,” he said.
“We have more foreign exchange than we need to meet our essential requirements. Therefore, an exchange rate, which clears the market with supply equalling demand will result in much stronger local currency,” said Mr Cross.
In a bid to try and curtail resurgent inflation in the economy and stabilise the volatile parallel market exchange rate, the RBZ has significantly increased the bank policy rate to 80 percent from 60 percent and further cut down the quarter target for money supply growth.
The Medium-Term Bank Accommodation Facility Interest Rate has also been reviewed from 40 percent to 50 percent with minimum deposit rates for ZW savings and time deposits up from 10 percent and 20 percent to 12,5 percent and 25 percent respectively.
Among other measures the MPC also ensured that commercial imports are processed through normal banking channels in line with international best practices, among other measures.
But Mr Cross, who was once a member of the RBZ Monetary Policy Committee, said Zimbabwe’s economic problems are unique as they are mainly created by the Zimbabweans themselves.
“The core problem is the parallel market rate and this is now rapidly approaching ZW$300 for US$1 and I don’t see how it can be halted because the issues causing this are not in any textbook of any university in the world. This is a unique Zimbabwean situation,” said Mr Cross.
He suggested that two key decisions need to be taken. “Firstly, we need to make Zimdollar a sole means of exchange and secondly, we need to buy in US$ at an exchange rate, which will keep export industries competitive,” said Mr Cross.
Mr Cross said people should also be free to go into any bank with local currency to buy foreign currency to meet their needs.
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