Com­ple­ment Govt by adopt­ing cash­less trans­ac­tions

Chronicle (Zimbabwe) - - National News -

IF there was a time when Zim­bab­weans needed to unite and work with the Gov­ern­ment in turn­ing around the econ­omy, it is now. We need to do away with spec­u­la­tive ten­den­cies and be re­al­is­tic about our sit­u­a­tion as a coun­try and the mea­sures we adopt to trans­form the econ­omy. Re­serve Bank of Zim­babwe (RBZ) Gover­nor Dr John Man­gudya said it openly on Thurs­day that bond notes are com­ing next month and there is no re­verse gear on that.

While he ac­knowl­edged pub­lic fears and con­cerns over in­tro­duc­tion of bond notes, he em­pha­sised on the un­der­stand­ing of its mer­its to the over­all econ­omy.

The re­al­ity is that the Zim­bab­wean econ­omy is suf­fer­ing from sub­dued do­mes­tic pro­duc­tion across all the key sec­tors and that is man­i­fested through a widen­ing trade deficit of around $2.5 bil­lion an­nu­ally, said the Gover­nor while pre­sent­ing his Mid-Term Mone­tary Pol­icy State­ment. “At the rate at which the coun­try is ex­port­ing and based on sta­tis­tics . . . we an­tic­i­pate that bond notes equiv­a­lent to around US$75 mil­lion will be in the mar­ket by the end of De­cem­ber 2016.

“The bond notes, which will start to cir­cu­late by end Oc­to­ber 2016, will be at par with the US$ (that is; one to one) and will be used and treated in the same man­ner as bond coins,” said Dr Man­gudya.

We con­cur with Dr Man­gudya that the present eco­nomic sit­u­a­tion re­quires a sub­stan­tial pol­icy re­set to pro­mote ex­ports in view of lack of com­pet­i­tive­ness of lo­cal ex­ports.

The coun­try needs to do things dif­fer­ently and “walk the talk” to trans­form the econ­omy by chang­ing the nar­ra­tive from con­sump­tion to pro­duc­tion, he said.

The re­al­ity of global shocks such as the strength­en­ing of the US$, the de­cline in global com­mod­ity prices and gen­eral in­ter­na­tional liq­uid­ity trou­bles jus­ti­fies the adop­tion of pro-ac­tive pol­icy mea­sures like bond notes, es­pe­cially for Zim­babwe, which does not have its own cur­rency.

We sup­port the RBZ’s po­si­tion of bring­ing san­ity in the man­age­ment of for­eign ex­change in or­der to pro­mote lo­cal pro­duc­tion and re­duce im­port de­pen­dence. Do­ing noth­ing about this bal­loon­ing trade deficit does not do the coun­try any good hence we need not be overly pes­simistic about mea­sures that seek to sal­vage our econ­omy from fur­ther ruin.

It is against this back­ground, Dr Man­gudya said, that the cen­tral bank has in­tro­duced the per­for­mance re­lated ex­port in­cen­tives or bonus scheme to be awarded to ex­porters of goods and ser­vices so as to ad­dress chal­lenges of low pro­duc­tion.

We strongly sup­port the RBZ stance that this coun­try needs more ex­ports to liq­uefy the mul­ti­c­ur­rency sys­tem that was adopted in 2009.

“In sim­ple terms ex­porters will re­ceive the in­cen­tive pro­ceeds in US$ and the in­cen­tive will be cred­ited to their US$ ac­counts in US$ cur­rency. An ex­porter will then trans­act through RTGS, makes for­eign pay­ments for im­ports of goods and ser­vices and trans­act freely within the multi-cur­rency ex­change sys­tem. It is also im­por­tant to note that bond notes shall not be forced on peo­ple who do not like them,” said Dr Man­gudya.

The Gover­nor said the is­suance of bond notes has a self-con­trol mech­a­nism in that when there are no ex­ports there will be no bond notes. As such, he said, the bond notes would be grad­u­ally re­leased into the econ­omy in tan­dem with ex­port re­ceipts through nor­mal bank­ing chan­nels up to a max­i­mum ceil­ing of the fa­cil­ity of US$200 mil­lion.

The ceil­ing would be at­tained when to­tal ex­ports are around US$6 bil­lion, he said. We also ap­plaud the apex bank for put­ting in place mea­sures to deal with ex­ter­nal­i­sa­tion and or cap­i­tal flight as well as the in­ef­fi­cient dis­tri­bu­tion and util­i­sa­tion of for­eign ex­change.

Zim­bab­weans need to have con­fi­dence in Gov­ern­ment as­sur­ance that the com­ing in of bond notes does not mark the re­turn of the Zim­babwe dol­lar through the back door.

As Dr Man­gudya said, the macro-eco­nomic fun­da­men­tals or con­di­tions for the re­turn of the lo­cal cur­rency are not yet right to do so. Among other safe­guards, Dr Man­gudya has pro­posed the set­ting up of an in­de­pen­dent board to have an over­sight role on the is­suance of bond notes in the econ­omy.

We back the calls by the Cen­tral Bank to ad­dress the more than 90 per­cent pub­lic sec­tor wage bill, which con­tin­ues to un­der­mine de­vel­op­ment projects.

In­deed we need na­tional sac­ri­fice, sin­cer­ity and in­tegrity now and the abil­ity to share the ad­just­ment or trans­for­ma­tion bur­den across the board and be­tween the fis­cal and mone­tary poli­cies. This is the Gover­nor’s ap­peal. We feel this is a strong mes­sage from the Cen­tral Bank that should be com­ple­mented by a pos­i­tive at­ti­tude from ev­ery Zim­bab­wean and con­scious steps to­wards trans­for­ma­tion.

In­cen­tivis­ing in­flows from the Di­as­pora and pri­vate un­re­quited trans­fers, the pro­posed $215 mil­lion Nos­tro sta­bil­i­sa­tion fa­cil­ity, the US$20 mil­lion pack­age for small scale gold pro­duc­ers as well as the $10 mil­lion hor­ti­cul­ture fa­cil­ity, are some of the pos­i­tive point­ers from the RBZ.

It is also en­cour­ag­ing that con­fi­dence in the bank­ing sec­tor is grow­ing as ev­i­denced by a 5.2 per­cent growth in to­tal de­posits by June 30, 2016, to 45.9 bil­lion. We urge banks to com­ple­ment this by charg­ing rea­son­able in­ter­est rates, which Dr Man­gudya said should not ex­ceed the agreed 15 per­cent thresh­old. Busi­nesses and in­di­vid­u­als should also sup­port the Cen­tral Bank in pro­mot­ing fi­nan­cial in­clu­sion and adop­tion of cash­less pay­ment sys­tems such as the use of plas­tic money through point of sale (POS) machines, on-line bank­ing, trans­fers and other elec­tronic bank­ing sys­tems to ease de­mand for cash.

We, how­ever, urge the Cen­tral Bank to ur­gently ad­dress the per­sis­tent cash short­ages, which have seen de­pos­i­tors in­clud­ing the el­derly spend­ing days at bank­ing halls to get their money.

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