Reserve Bank of Zimbabwe Governor Speaks Out
May 8, 2014
Happiness Zengeni Business Editor
Zimbabwe Herald
Zimbabweans should be disciplined, courageous and skilful to overcome challenges facing the economy, newly-appointed Reserve Bank of Zimbabwe Governor Dr John Mangudya has said. In his maiden statement as central bank chief yesterday, Dr Mangudya expressed optimism that Zimbabwe would overcome its challenges, but only if it was disciplined in efficient use of resources.
“The greatest panacea of our challenges is discipline. The discipline to know that we need to increase production before we increase consumption. We need to refrain from living beyond our means, as this would bring greed and corruption.”
Dr Mangudya said some of the challenges which need to be addressed include low aggregate domestic demand, deterioration of balance of payments support, banking sector vulnerabilities and low industry capacity utilisation.
“The economy is weaker and the financial system is depressed. We need to be courageous and skilful to manage the situation onhand.”
The RBZ is presently incapacitated to influence the level of liquidity in the economy since the adoption of the multiple currency regime in February 2009.
Zimbabwe, said the central bank chief, needed to find equilibrium between the need to promote indigenisation and the need to attract foreign direct investment in a manner that synchronises the two.
He called for the integration of Zimbabwe in the global arena. Zimbabwe has missed out on investment and development targeted at emerging economies in recent years.
The US enacted the Zimbabwe Democracy and Economic Recovery Act, a sanctions regime that was signed into law by then president George W Bush, and which binds US executive directors to all multilateral lending institutions with dealings with Washington to vote against the extension of lines of credit to Zimbabwe.
Economists say while there has been a global shift towards greater investment around the developing world, it has happened in the years Zimbabwe was in economic trouble and as such the country would need to catch up.
While RBz had no tools presently to directly influence the economy, Dr Mangudya said, its greatest strength rested on relationship management, policy advice and the ability to put in place nationally beneficial financial structures to improve liquidity.
Since it does not print its own currency, Zimbabwe has to rely on exports, FDI, Diaspora remittances, donor finance and lines of credit for cash.
The country’s liquidity situation has been compounded by its huge debt overhang, which means it cannot access funding from most international lenders.
Further, most of these lenders have American directors, who are compelled by Washington’s sanctions law — now called the Zimbabwe Transition to Democracy and Economic Recovery Act — to largely oppose extension of assistance to the Government in Harare.
To overcome its financial handicap, Dr Mangudya said Government should put in place financial structures that increase liquidity and unlock value in the economy.
Also important, he added, was for Government to work towards meeting critical objectives enunciated in the Zimbabwe Agenda for Sustainable Socio-Economic Transformation.
Dr Mangudya said at the centre of the country’s liquidity crunch was the banking sector, which had no interbank market, and a central bank that cannot perform its lender of last resort function.
As such, he said, the RBZ should find resources to resume its key functions.
The launch of the inter-bank market on March 22 coincided with Dr Mangudya’s appointment and was set to be opened on the 24th of that month.
According to the terms of the agreement signed between the Government of Zimbabwe and the African Export and Import Bank, the facility will be in the form of Afreximbank Trade Debt-backed Securities (Aftrades) that will be provided to participating banks for placement in the interbank trade.
By last week, three banks had been placed in the category of those with liquidity to place in the interbank market against the Aftrades instrument as security, while six others had applied to be vetted.
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| Republic of Zimbabwe Bank Governor Dr. John Mangudya has encouraged people to be disciplined. |
Happiness Zengeni Business Editor
Zimbabwe Herald
Zimbabweans should be disciplined, courageous and skilful to overcome challenges facing the economy, newly-appointed Reserve Bank of Zimbabwe Governor Dr John Mangudya has said. In his maiden statement as central bank chief yesterday, Dr Mangudya expressed optimism that Zimbabwe would overcome its challenges, but only if it was disciplined in efficient use of resources.
“The greatest panacea of our challenges is discipline. The discipline to know that we need to increase production before we increase consumption. We need to refrain from living beyond our means, as this would bring greed and corruption.”
Dr Mangudya said some of the challenges which need to be addressed include low aggregate domestic demand, deterioration of balance of payments support, banking sector vulnerabilities and low industry capacity utilisation.
“The economy is weaker and the financial system is depressed. We need to be courageous and skilful to manage the situation onhand.”
The RBZ is presently incapacitated to influence the level of liquidity in the economy since the adoption of the multiple currency regime in February 2009.
Zimbabwe, said the central bank chief, needed to find equilibrium between the need to promote indigenisation and the need to attract foreign direct investment in a manner that synchronises the two.
He called for the integration of Zimbabwe in the global arena. Zimbabwe has missed out on investment and development targeted at emerging economies in recent years.
The US enacted the Zimbabwe Democracy and Economic Recovery Act, a sanctions regime that was signed into law by then president George W Bush, and which binds US executive directors to all multilateral lending institutions with dealings with Washington to vote against the extension of lines of credit to Zimbabwe.
Economists say while there has been a global shift towards greater investment around the developing world, it has happened in the years Zimbabwe was in economic trouble and as such the country would need to catch up.
While RBz had no tools presently to directly influence the economy, Dr Mangudya said, its greatest strength rested on relationship management, policy advice and the ability to put in place nationally beneficial financial structures to improve liquidity.
Since it does not print its own currency, Zimbabwe has to rely on exports, FDI, Diaspora remittances, donor finance and lines of credit for cash.
The country’s liquidity situation has been compounded by its huge debt overhang, which means it cannot access funding from most international lenders.
Further, most of these lenders have American directors, who are compelled by Washington’s sanctions law — now called the Zimbabwe Transition to Democracy and Economic Recovery Act — to largely oppose extension of assistance to the Government in Harare.
To overcome its financial handicap, Dr Mangudya said Government should put in place financial structures that increase liquidity and unlock value in the economy.
Also important, he added, was for Government to work towards meeting critical objectives enunciated in the Zimbabwe Agenda for Sustainable Socio-Economic Transformation.
Dr Mangudya said at the centre of the country’s liquidity crunch was the banking sector, which had no interbank market, and a central bank that cannot perform its lender of last resort function.
As such, he said, the RBZ should find resources to resume its key functions.
The launch of the inter-bank market on March 22 coincided with Dr Mangudya’s appointment and was set to be opened on the 24th of that month.
According to the terms of the agreement signed between the Government of Zimbabwe and the African Export and Import Bank, the facility will be in the form of Afreximbank Trade Debt-backed Securities (Aftrades) that will be provided to participating banks for placement in the interbank trade.
By last week, three banks had been placed in the category of those with liquidity to place in the interbank market against the Aftrades instrument as security, while six others had applied to be vetted.
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