Nevanji Munyaradzi Chiondegwa
The Reserve Bank of Zimbabwe has called on business to avoid confrontation over issues of economic concern, urging them to instead try engagement.
Last week, the Confederation of Zimbabwe Industries( CZI), a lobby organisations for industrialists in ZImbabwe issued a scathing paper on the currency situation in Zimbabwe in which they all but accused the monetary authorities of mishandling the economy.
RBZ Governor Dr John Mangudya has since repudiated the claim.
The CZI statement which at face value, sounded like advice was actually chastising the RBZ and accusing it of among other issues not defending the local currency and not strengthening the economic fundamentals that support any currency in use.
They also stated the fundamentals including prudence in money supply, a market determined or liberal foreign exchange market, foreign exchange reserves and central bank transparency especially on debt and liabilities. These they seemed to imply were lacking.
CZI said, “CZI believes what we are witnessing on the Zimbabwe Dollar (Z$) is tantamount to a bank run on the Reserve Bank of Zimbabwe (RBZ). Mervyn King, Governor of the Bank of England famously said that it may not be rational to start a bank run, but it is rational to participate in one once it has started.
The material and all the case studies on bank runs point to aggressive actions to restore trust in the institutions affected. Aggressive, transparent and visible actions are the only way to save the Z$ and stop the bank run.”
They continued and said, “We are a point where what to do is just as important as what should not be done. Mono currency ZWL without international reserves should not be done as the economy is not ready for mono currency. Foreign currency accounts should not be raided as has happened before with serious consequences of loss of value at all levels of business and society,” the CZI said.
The CZI took a swipe at the Dutch Auction System and accused the Apex Bank of flagrantly violating rules of the auction system, tersely stating,
“The Dutch auction was initially implemented according to the rules of the auction which rules were flouted and this is evidenced by the failure of the auction to settle bids and accumulating backlogs stretching over ten-week periods. This means the auction was auctioning money that was not there.
Reports of companies having bids being prorated yet they would have submitted high-rate bids are also an indication the Dutch auction rules which state that the highest bidders get all their allotments was flouted. We published and shared a paper highlighting potential pitfalls which was a comparative analysis of auctions that have succeeded or failed, and we have gone on to do what is in the auctions that have failed,” the lobby group said.
In response, the RBZ issued a statement of its own in which the Bank denied the accusation made by the CZI.I
n the statement, RBZ Governor, JP Mangudya reiterated that the Dutch Auction System is here to stay and that they were not raiding foreign currency accounts and doing a bank run.
Dr Mangudya said said; “On 22 April 2002, the Confederation of Zimbabwe Industries (CZI) issued a paper which it styled as an urgent engagement paper on the currency situation in the country. In that paper, CZI called for, among other things, the suspension of the foreign exchange auction system and alleged that a mono-currency system was in place and also made unfounded references to “raiding” of Foreign Currency Accounts (FCA) and a bank run.”
Dr Mangudya continued, “The Reserve Bank of Zimbabwe (the Bank) wishes to draw the public’s attention to the fact that the contents Of the CZI paper are a response to rumours and not based on facts on the ground. The contents of the said CZI paper and the impressions depicted therein are unfortunate and uncalled for as they have the potential of destabilising financial markets and economic stability of the country.”
The RBZ then clarified issues oulinimg the measures currently taking place.
The Governor said that Government and the Bank are committed to an orderly de-dollarisation process and hence it is false that a mono-currency system is now in place. He further stated that the foreign exchange auction system remains in place and will not be suspended as doing so will cause shortages of goods in the market and abet inflation.
He also assured the public that all foreign exchange accounts are safe and the Bank has no reason or appetite to “raid” the accounts as alleged in the CZI paper.
The Governor took a swipe at the CZI saying, “The Bank has also noted with serious concern that CZI has published the paper without engaging it to establish the veracity of the rumours that motivated the paper.
“Consequently, CZI has created a negative impression that has the effect of stocking market confusion and inflation. The Bank is always at the disposal of stakeholders, including CZI, for discussion and dialogue with a view to fostering interests of industry and the economy and avoid causing market instability,” said Dr Mangudya.
He advised the public to disregard the contents of the CZI paper.
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