Business Reporter
ECONOMIC expert, Persistence Gwanyanya says the raft of measures implemented by monetary authorities recently will trigger long term positive impact which will stabilise the markets in the long term.
The remarks come shortly after the implementation of a raft of measures which among others include; removal of duty payment for basic commodities, revamping the Dutch Auction System, strengthening excess liquidity mop up and scaling up gold coins among other measures.
The moves were in response to rapid deterioration of the exchange rates which have now reached around US$1: 4000 and even higher for companies and retailers in the trade of selling.
But economic analyst, Gwanyanya expressed optimism that owing to the measures implemented by the authorities will have a positive impact in the long term.
He said consistent with sound economic management, the Reserve Bank of Zimbabwe’s (RBZ) Monetary Policy Committee (MPC) considered the multifaceted nature of price and exchange rate instability in Zimbabwe, both supply and demand side interventions were necessary.
Gwanyanya said supply side measures implemented so far are expected to increase the supply of foreign currency in the formal market to support import requirements of the market.
“The establishment of wholesale foreign currency market where RBZ sells forex to banks for onward sale to their customers is seen as supporting the interbank market for forex. The central bank will set a market-determined floor price at which banks buy forex for onward sell without limits on the margin as before,” he said.
He said assuming a floor price of US$1:ZW$5000, all the usable bank balances of ZW$219 million can be wiped away by US$43,8 million on the back of a comforting fact that RBZ has the required US$ to intervene in the market until stability is achieved.
The top economist who also sits in the MPC said in order to cater for mainly MSMEs’ forex needs, the Dutch Auction system shall remain, with weekly allocation now pegged at US$5 million.
“The widening of Dutch Auction limits to US$1.5k US$ 50k from US$2.5k to US$20k is seen as accommodating the informal sector. Increased demand for the ZW$ to pay for duties and taxes, most of which are now payable in ZW$, is expected to see adjustment towards rate equilibrium.
“Importantly, money supply growth is expected to be significantly following the transfer of external debt and its payment to Treasury. Treasury shall provide ZW$ funding for the purchase of US$s needed to repay external debt from the 25% forex surrender.
He said the increase in statutory reserves to 15% from 10% is also seen as curtailing ZW$ supply growth in order to minimise the risk of re-dollarization, MPC slightly increased the MBA & Bank rate by 5%, a move the top economist said will support ZW$ borrowings, which were dwindling as shown by the low ZW$ loan -to-deposit ratio of around 50%.
“The operationalisation of digital gold tokens in the transactional space is also seen as a factor supporting ZW$ demand. A return to stability is quite possible,” added Gwanyanya.
