Contain 'cash burning', up money supply

Published: 04 July 2017

RESERVE Bank of Zimbabwe (RBZ) governor, John Mangudya is this month expected to announce the Mid-Term Monetary Policy Statement, with economists calling for measures to contain "cash burning" and increase money supply.

Mangudya said the apex bank was consolidating all the information ahead of the announcement by end of July.

"You know that mid-years [Mid-Term Monetary Policy Statements] are always done after the end of June and towards the end of July because we will be reporting for half year," he said on the sidelines of the Afreximbank annual general meeting in Kigali last week.

"So all the needed statements should be there by then. So it will be announced end of July, by then we will have all the information we need."

Asked what the market should expect from the policy statement, Mangudya said "everything".

But labour and Research Institute of Zimbabwe economist, Prosper Chitambara said the market should not expect much from the policy, except clarity on whether the apex bank would introduce more bond notes.

"We don't expect much from the mid-year monetary policy under the current circumstances given that we are in a dollarised regime," he said.

"There is not much he can do. There is need for clarity on bond notes. The market wants clarity on whether we are going to have more bond notes."

Chitambara said if more bond notes were coming, they should be backed by production in order to tame inflation.

"If more bond notes come into the market, it will drive inflationary pressures depending again on the quantum of bond notes. The supply of bond notes should be tied to productivity so that they don't become inflationary," he said.

Buy Zimbabwe chief economist, Kipson Gundani said he expected the monetary authorities to instil confidence in conventional banking, adding that the apex bank faces an insurmountable task to discourage the flourishing cash spinning.

"We expect the monetary authorities to morally persuade the people to have confidence in the conventional banking system," he said.

"Another one, which is an offshoot of confidence, is how to dis-incentivise the parallel money market. We expect the governor to discourage the flourishing of the parallel money market, which is causing multiple pricing systems of goods on the market."

Gundani said the cash crisis could be tamed by encouraging exports.
- newsday