We feel your pain: RBZ
Harare (New Ziana) -The government is aware of the current economic challenges and is seized with implementing several correctional measures to provide both short and long- term relief to citizens, Central Bank governor Dr John Mangudya said on Monday.
A run-away parallel market exchange rate, increasing appetite by business to benchmark prices of goods and services against black-market rates and a depressed local currency have fuelled challenges in the economy.
Appearing before the Parliamentary Portfolio Committee on Budget and Finance, Mangudya said recent monetary and fiscal pronouncements were part of government efforts to cure the economic ills spurred mainly by speculative and unethical behavior in the market.
Geopolitical developments such as Russia’s special military operation in Ukraine were also adding on to the domestic factors.
“We do feel the pain of this economy and because we feel the pain of this economy that is why we are doing all we think is necessary for this economy to recover,” he said.
Last week, the government legislated the continued use of the US dollar alongside the local currency for the next five years to entrench confidence in the market.
On top of that, the use of the inter-bank market exchange rate in all economic transactions will also be legislated as the government seeks to rein in the parallel market bench-marking of prices.
The RBZ also hiked interest rates in a bid to discourage speculative borrowing from banks.
Mangudya said he believed Zimbabweans wanted their currency to succeed, as such, the government would do all it can to ensure it remains stable.
Warding off calls to dollarise, Mangudya said the idea was an emotional one, highlighting that abandoning the local currency in 2009 was a mistake which the country will take a long time to recover from.
“This economy has no capacity to fully dollarise. The preference might be there, which is emotional, I feel the emotion but the capacity to re-dollarise this economy is not there,” he said.
“Zimbabwe will become a supermarket economy (if the country re-dollarise). We have been there before and that journey is a painful journey which as a governor of the Central Bank I will not propose to the August House. It is an easy way out, but the wrong way out.”
Last month, the government announced several measures to stabilise the price of fuel, maize meal and bread.
On fuel, the government completely removed the fuel levy on diesel while that on petrol was reduced to US4.7 cents per litre, preventing it from breaching the USD2.00 per litre mark.
On bread, starting this month, grain millers will be accessing 20 000 tonnes of wheat per month from the Grain Marketing Board to shore up the millers’ own supplies as government moves to cushion the public from further bread price increases.
On maize, government released 7 000MT outstanding maize allocations to millers which had already been paid for but could not be allocated due to technical issues.
The government was also meant to advance 25 000MT of maize to millers which they would return to the GMB once their own supplies bought outside the country arrive.
To cushion its workers, the government has indicated that there was scope within the current national budget to further increase salaries for its workers on top of the 100 percent increment that was announced last month.