Space Summary
The Twitter Space Did the Monetary Policy Statement measure up to challenges confronting the economy? hosted by NewsDayZimbabwe. Exploring the recent Monetary Policy Statement and its alignment with economic challenges is crucial for stakeholders. The insightful analysis provided by @thestandardzim and @Zimindependent sheds light on the effectiveness of economic measures. Evaluating the response of the economy to obstacles aids in making informed decisions. Stay updated on top news, breaking news, sports news, and analysis to grasp the current economic landscape.
For more spaces, visit the Infrastructure page.
Questions
Q: What is the significance of analyzing the Monetary Policy Statement in today's economy?
A: Understanding the effectiveness of economic measures is critical for gauging stability and growth.
Q: Why are updates from @thestandardzim and @Zimindependent valuable?
A: These sources offer diverse news perspectives essential for a well-rounded view of economic developments.
Q: How does analysis of top news and features contribute to economic insights?
A: In-depth coverage provides context and understanding of the factors influencing economic decisions.
Q: Why is it important to assess the response of the economy to challenges?
A: Evaluating responses helps in identifying gaps, strengths, and areas needing improvement for better economic outcomes.
Highlights
Time: 00:15:42
Decoding the Monetary Policy Statement Analyzing the implications and effectiveness of the latest economic measures.
Time: 00:30:18
Insights from @thestandardzim and @Zimindependent Gaining diverse news coverage perspectives for a comprehensive understanding of economic events.
Time: 00:45:59
Impact Analysis of Economic Measures Assessing how recent policies address challenges and shape the economic landscape.
Key Takeaways
- The analysis of the Monetary Policy Statement against economic hurdles is crucial.
- Insights on top news, breaking news, sports news, features, and analysis are essential for a comprehensive understanding.
- Updates from @thestandardzim and @Zimindependent provide valuable perspectives on economic measures.
- Evaluation of the economy's response to challenges is vital for informed decision-making.
Behind the Mic
Introduction to the Discussion
Good evening and welcome to another Twitter space brought to you by Alpha Media Holdings. Alpha Media holdings is the publisher of Newsdays, Mabo Independent and the Standard. And we continue with our discussion on monetary policy this week. The question, or the topic for this discussion is did the Manta policy statement measure up to challenges confronting the economy? My name is Silence Mkanzoeta and I'll be co-hosting with Julian Leila and Shem Makoshori now to help us discuss the topic, we have experts. We have Prospachtambara, who is a development economist. We also have Chennai Mutambasiri, who is also a development economist and a lecturer at the National Investor of Science and Technology, Stevenson Glamini. We welcome our panelists and we would like them to evaluate and share knowledge on what they've observed so far on the mandatory policy.
Engaging the Audience
We shall be opening our space to our audience so that they can contribute or ask questions that they have at this moment. I would like to ask Prosper to kindly accept an invitation so that you can be a speaker. But amongst the questions that we are looking at to be answered, we are looking at the information. According to the government, zig has been overwhelmingly embraced by the transacting public. So the decision from a perception survey shows that it has got 90% acceptance nationwide. It shows that it has been fully embraced by businesses and accepted by the transacting public for both transactional and savings purposes. We would like to understand from our panelists what they think about this perception survey. But let's hear from Chennai probably give us your opening remarks to this discussion.
Expert Perspectives on Zig Acceptance
Good evening. Thank you for having me again and good evening to everybody who's joined the space. Right. I mean, you start us off with a very important question, you know, in terms of the zig acceptance. And I actually said just in discussions, in another discussion that I felt that this monetary policy statement, quite a big chunk of it was centered around the Zig propaganda. You know, we're really, really seeing the governor there, or the NPC or whomever puts together. You know, we also saw the introduction of other committees. I don't know now who's responsible for what, but there is a lot of the zig has been accepted. You know, if you were to count how many times that is insinuated in a mid-term review of a monetary policy statement is quite unsettling.
Understanding the Definition of Acceptance
We want to understand, even by definition, what they actually mean when they say zig acceptance. So I've had a look at in terms of the broad reserve stocks. And I think Zig is less than 10%, in my opinion, circulation in the economy. So when they are saying 91% acceptance, what do they mean to? Because for instance, if you are working on a government contract and you are paid in Zig, I don't think you have necessarily the choice to say no. Or if you are working as a civil servant and your wages are paid in Zig, I don't think you have the option to say no. So this idea of acceptance, we need to really understand what they mean, what the definition of acceptance is.
Concerns About Monetary Policies
Again, you look at the ratio between the local currency and the zig, I think is the reserve stocks. And you can see that the economy continues to be dollarized most of the time. So it's really quite worrisome to some degree why the idea of zig is almost being forced down our throats. For me, I thought it's signaling really an issue of liquidity in the country. There is a claim that is made in the monetary policy statement with regards to a sustained current account surplus. And yet when you look at the actual. When it's then presented pictorially, you are seeing that the current account balance is actually negative and declining and is trending down, continues to trend downwards. The idea again of reserves, I think it was said that we've got something like 300 and something odd million US dollars in reserves.
Surprising Findings in the Report
But in the same report it will tell you that we have a backlog in terms of interchange auction. And these are some of the signs that says something is not right, something is nothing is not obviously adding up. So, you know, I'm looking forward to this discussion. I think in terms of the monetary policy statement, general rule that I always apply is read between the lines, see what it's saying. And then what it's telling you is perhaps a different story.
Inflation and Exchange Rate Concerns
You know, we looked at. I was looking at the even the zig rate which continues to be pegged under the artificial guise of willing buyer, willing seller. We all know that is not the case when they speak of the exchange rate, the 13.2 exchange rate. Again, I then also looked at the exchange rate. Sorry, the difference in terms of price when it comes to zig exchange for gold. And interestingly, between the. Since April, there's a 10% inflation in terms of what you would have bought gold for. I think it was at 1000oz at 33,000 towards the end of April. And then in this NP's, when we look at July, we are now at 36,000.
Gold Prices and Market Rate Discrepancies
And yet gold prices as we know have been falling. Clearly that already signals that there is an inflation and that the rate that the official zig exchange rate is being presented is not the real rate of exchange, even by their own calculators before we even look at what the parallel market is doing. So we need all these things. When you look at it, you've then got to wonder, why do they keep insisting, why are we shortchanging ourselves? Why are we shortchanging the public purse?
The Role of Commercial Banks
Another issue that kind of jumped out at me as well was the use of the lender of last resort facility. There is a line in the monetary policy statement that explains that due to short term liquidity challenges, there have been some banks who have utilized the lender of last resort facility. Now we really need to understand the breakdown of what that statement means. Which are these banks and how have we supported them through the lender of last resort facility. Because we have seen in the past, I think towards, after just before the elections, there was last year, there was announcement that the Ministry of Finance, the budget was actually assuming the ribs at debt.
Long-Term Results and Public Interest
And part of that debt included private debt that had been assumed from commercial banks such as CBZ. And, you know, so it's all these things that happen under the carpet, but they end up biting the ordinary, the person on the street. Because we are now using budget that should be used for social protection and is being diverted to support the commercial banks that will likely declare profit and huge dividends at the end of the year. But this is being done, you know, under the carpet. There's no public announcement. This is a matter of public interest. And really, you know, it's. We really should have been given a bit more of a breakdown of what does this mean?
Lack of Transparency in Financial Decisions
Which are these banks, you know, who are there any exposures in terms of their customers who have got their deposit saved with them? Because as we can see, you know, you look, even when you look at the reserve balance, right, which I said is, I think, I don't think it's moved. I think it's still very much at 285 if that million US dollars, you know, 285 worth of reserves for a country that runs on $10 billion and for a country that is going through a very difficult season in terms of the agriculture drought and more to come in terms of the different climate phenomenon that have been. That are likely to be experienced towards the end of the year and the start of next year, $285 million is not.
Concerns About Economic Resilience
It's barely enough. It's somebody's pay change. Somebody said to me that you look at the UK. And I think that is what they issue out. They issued out to the farmers in Scotland. They issued them about $200 million just to support them and give them a bit more resilience with the climate change phenomenon. Our reserve stocks are shockingly low, no matter how you say them. Again, you look at, in terms of the issues around, we talk of export retention as being a key contributor to addressing the supply demand mismatches.
Export Retention Challenges
Export retention is a terrible tax that is being put on the business sector and is likely to be resulting in them banking elsewhere and even exiting our economy. So to really put that forward as a key tool in addressing monetary supply and demand, I think we need really, it shows that we are lacking in terms of ideas of how we can broaden perhaps our tax base or how we can broaden our private sector base so that we're able to address some of our liquidity challenges as a country. And then, you know, another thing that jumped out at me was the stock market.
Stock Market Insights
Looking at the Victoria Fall Stock exchange, I think I've highlighted this for anybody who has been following some of my posts. You know, the period between March and towards the end of last year, there was a sharp decline in the share value index and the market capitalization at the Victoria Falls Stock Exchange, which really shows the extent to which our economy is exposed to political matters, you know, because the Victoria forced for all stock exchange, for all intents and purposes, you know, it should be rife with investors because, you know, of all the incentives that have been placed on companies that are listed on this stock exchange.
Market Capitalization Trends
But unfortunately, instead, what we are seeing is a direct correlation to the politics. And we had such a sustained, sharp decline that even in kind of, its sort of, you know, trending a little bit upward as of the last three months. But even that has been quite slow, even, you know, as reported in the monetary policy statement itself. So I'm not making this up. So, yeah, I think generally, to answer the question that is placed for this space, does the monetary statement give us any confidence that there are some tools and techniques that the central bank is employing to recover the economy?
Final Thoughts on the Monetary Policy Statement
Then I would say that is not the case. It does not seem to me that this is the objective even of the monetary policy strategy as it stands now. Theres also an introduction of a couple of committees that I wanted to also highlight. You will see that we now have the liquidity management committee, which apparently used to exist, im not sure when, because it speaks to it being reconstituted, but this is a joint committee between the Ministry of Finance and the Reserve bank of Zimbabwe. And for me this is very worrisome because one of the issues that has been called out time and time again is the lack of autonomy between the central bank and the Ministry of Finance that has resulted in the central bank undertaking quasi-fiscal activities that have resulted in them borrowing, resulted even in the issues around the excess monetary supply, involvements in issues such as command, agriculture, which really should be ministry focused issues rather than exposing us through the central bank.
Implications of New Committees
And so having these types of committees is very worrisome for me. I think it's a consolidation of something else that is outside the interest of the ordinary citizen in Zimbabwe and we really must keep an eye on it. It doesn't also say how this liquidity committee will relate to the MPC. Does that mean that the NPC has been superseded what will continue to be the role of the NPC in light of the new liquidity management joint committee? So these are some of the highlights that I will say in my first submission in terms of the monetary policy statement.
Request for Further Insights
Well, thank you so much, Chennai. Now Steve, please explain to us or give us your opening remarks. But in giving us your opening remarks, can you please try to explain to us? We have noticed a trend in which the zig prices have been adjusted in such a way that if you use the official rate, you can actually see that the price is probably double what it used to cost in USD. What are the implications for such a scenario to our economy or the zig itself?
Government Strategy on Monetary Policy
Thank you so much for this opportunity. I hope I'm audible. Yes, you can. Go ahead. You are very audible. Well, my remarks pertaining this monetary policy statement that was reviewed recently, the monetary policy illustrates consistency in the tone that the governor had said from the previous monetary policy statement that they are focused on ensuring that there is a tight monetary policy stance in the economy.
Concluding Remarks on the Current Policy
Implying that they are bent on making sure that what we experienced in the previous iterations of the currency will not be experienced currently. And they are trying to achieve that by making sure that there is tight liquidity management within the economy. They put in place higher interest rates that are meant to discourage higher and reckless lending. They've put in place incentives to try and ensure that the growth of money supply is limited because we know that what we've been experiencing in the past is that money supply growth has been undermining efforts to reduce inflation. So I would say what I picked there is that there's been that consistency.
Current Economic Challenges
And there are other factors that are okay to undermine some of the efforts to control liquidity. We have a growth in the zig. Well, I think we are losing you in some instances. If you can hear us, confirm you can hear me. While we wait for Stephen to sort this technical glitch, now prosper, we come to you. May you please give us your opening remarks on the top on our topic, probably answering whether you feel that the Mantari police statement did measure up to challenges confronting the economy. Well, Chennai, maybe we can come back to you. While we wait for our panelists prosper to probably fix his connection. What is it that you feel is wrong with our policies? Yes, yes, we can hear you. All right.
Monetary Policy Overview
I'm having some issues with my gadgets here, but I think first and foremost, let me just start by highlighting that I agree with some of the sentiments that have been proffered by my two esteemed panelists. Just to start probably the ball rolling, the framework of the manta policy has not really changed. The central bank has indicated that they are continuing to follow a very tight monetary policy stance. Even when you look at the bank policy rate, it hasn't been adjusted. The stage to reserves have also remained the same. And of course, I think two days, a day ago, we also saw the central bank has issued exchange control, secular number three, which is basically trying to bring some sanity order in terms of the interbank market. So obviously that's also supporting the midterm mandal policy review. Maybe also to highlight that, yes, we're beginning to see some relative stability in terms of the inflation numbers and also in terms of the exchange rate.
Inflation and Market Dynamics
But of course, recently, in the past few weeks, we've seen how that the black market premium is now begun to widen, which obviously is a major concern because it then leads or feeds inflationary pressure. So the black market premium is one of the key drivers of inflation and of course, money supply growth. So those are the two biggest drivers, or those have been the, traditionally been the two biggest drivers of inflation. And the two are obviously related also to each other. Ultimately, my view has always been that confidence and trust in a currency is a function number one of the inflationary performance or inflationary outcomes. What inflation does is that it erodes real incomes. So when there is high inflation, people lose confidence and trust in the local currency. So that's number one. Number two, also the amount of reserves that we actually have in our votes.
Comparison of Foreign Reserves
And we've seen this even in countries like Russia. Russia has been able to build adequate reserves, to be able to stave off any, even any speculative attacks to its currency. So the russian ruble has remained fairly stable, is partly because of the amount of reserves that they've been able to build. Even China. China is also a very good, classic example of a country that has been able to build a massive reserves, currently estimated about $3.2 trillion. And they've been able, obviously, to use those reserves to stabilize the chinese people's currency or the chinese ruble. When you look at Zimbabwe, our reserves are still on the very low side. Ideally, Sadiq said that we must aim for at least the three months to six months import cover in terms of reserves, and that amounts to about between 2.3 billion or 2.4 billion.
Demand for USD and Interbank Market Issues
That's three months import cover. Then six months import cover, that's about 4.6 billion. So we must be aiming at around anything between 2.3 and 4.6 billion in terms of our reserves. Obviously that will provide for adequate cover in terms of defending the zig, if need be. But one of the major concerns, obviously, when you speak to business people, is the fact that the interbank market is not fully satisfying or satiating their demand for USD. On average, businesses are only accessing 20% of their foreign exchange requirements on the inter bank market. So then obviously also then creates. It means that they have to seek recourse, probably to the alternative market in terms of the other 80% that is actually not being satisfied on the interbank market.
Export Growth and Currency Demand
Of course, this against the background where we have seen that our exports obviously have actually increased. According to statistics from the midterm policy review, there has been a significant improvement in terms of our exports. But in spite of that, the demand for the USD remains very strong. I think it's also to do with, because of the tight liquidity situation with respect to the zig, obviously, I think that is also a different point, but that has also created a strong demand for the USD that we actually see. So I think the widening obviously, of the premium, it's a major concern to not just the central bank, but also to the fiscal policy authorities.
Fiscal Policy Challenges
But it's also important to emphasize that when you look at the midterm fiscal policy review, my view is that it's clear that at some point we are going to, for the minister did not actually announce a supplementary budget, but a number of ministries have already exceeded their budgets for this year. So it's clear that the deficit for this year will probably be huge on account of the huge pressures on public spending because of the infrastructure financing and also even the need to finance agriculture. Now we are preparing for the next agricultural season, and also social protection in view of the impact of the El Nino induced drought. So the fiscal policy, my view is that it will remain expansionary at a time when the mandal policy has been tightened.
Coherence in Policy Approach
So the two obviously not complement each other and even speak to each other. They will probably work at cross purposes. So obviously that will not augur well in terms of ensuring optimal macroeconomic outcomes. So I think those are my opening remarks. The major trust really, of the manta policy hasn't really changed. Obviously, the issues to do with the limited supply of foreign exchange on the interbank market, I think remains and it will obviously continue to loan large. I think one major issue also is the fact that whilst we have speaking to the president of MKos a few weeks ago, he was telling me that there's a huge amount of willing buyers on the interbank market that are actually not being matched by willing suppliers.
Interbank System Distortions
So obviously that again, I think it's also to do with the distortions within the whole interbank system. Because if you go to the interbank system and you bid, say to buy USD, if you go to a bank rather, and you bid to buy USD, say for 20 zig, you will not actually be allowed to buy the USD at that rate. So I think it's also pointing to probably some kind of distortions within the whole interbank system. So some could actually argue that the interbank system may not be fully reflective of the market dynamic forces of demand and supply, which may lead to challenges in terms of the price discovery. So maybe let me end there for now. Thank you.
Opening Remarks on Currency Use and Inflation
Thank you so much. Mister Chitemba, on those opening remarks. Mister Lamine, are you back on? Yes, I'm back, Julie. Okay, thank you so much. So can you please give us opening. You are audible, you are allowed in thinking. Please give us your opening remarks since you were disturbed earlier. So Mister Chitambara is talking about inflation rate wireless Chennai was worried about the fact that Zik acceptance. The fact that Zik is being accepted by the general public is just a big statement since civil servants are mostly being paid in local currency. What could be your opening remarks on those statements?
Reflections on Zik Acceptance
Well, my opening remarks pertaining to the zig acceptance, I could say perhaps the zig acceptance is being referred. That is being referred to actually refers to the usage of the zig. Bearing in mind that there are sentiments to the effect that we might be de dollarizing anytime soon, the tendency with the general public is to use the currency that they believe would be inferior to the one that they believe is superior. But because there is no clear roadmap for de tolerization, people will start using the zig more and hold on to their currency, which is the USD. Perhaps this could explain why there's been an increased usage of the zig vis the USD, so we can take it as acceptance. We may also look at it as substitutionality.
Inflation and Economic Behavior
People are not scrutinizing asymmetry surrounding the issue of the de dollarization roadmap when it comes to inflation is inevitable. Once producers realize that there is a growing increase in the use of a particular currency, especially towards hoarding, with a leaning towards hoarding of goods, they would definitely increase prices to ration their products, which would eventually translate into inflation. We also noticed that there's been growing activity, especially in the Zimbabwe stock exchange. That rise activity is showing where people are placing their value preservation, because the returns in that market are quite positive and keep up to date with changes in the parallel market.
Call for Clear Policies on De Dollarization
Perhaps that also should be signaling to us that we need a clearer policy that would explain to people the roadmap to post de tolerization, so that we avoid even seeing. Recently there's been a secular from the abyss discouraging the double use of invoices. That shows that producers, perhaps suppliers, have been sending invoices to more than one institution, taking advantage as well of that willing seller, willing buyer market. That is what preempted that secular as well, to instruct dealers to be more stringent in how they honor those invoices. That is also reflecting distortions in the market.
Need for Addressing Market Distortions
So instead of responding to the symptoms, perhaps we need to identify what could have been the cause. But overall, I appreciate that the monetary policy still sticks to a contractional nature. This is quite consistent with what even the IMF staff monitored program prescribes. It prescribes a very stringent monetary policy stance, which must be complemented, as it has been highlighted by a. An equally contractional fiscal policy. I'm sure these new committees, or that have been, or the existing committees, that they've been reconstituted will bear that in mind, because monitoring money supply needs to also monitor the growth, as well as the growth from the financial markets.
Need for Transparency in Communication
The two need to be coherent so that we have a consistent policy. So overall, I think we need to have more transparency, more communication coming in to spell out the policies clearly going forward to avoid any speculative behaviors that may undermine the sincere interest of trying to curb inflation and price instability by the central bank. Those could constitute my opening remarks. Oh, thank you so much for those opening remarks.
Discussion on Exchange Rates
Doctor Lamini, coming back to you, Chennai. The exchange rate continues to be stable, benefiting the resilience of the economy, particularly the country's foreign currency generation capacity, which has remained robust. Does this accurately describe developments on both the formal and the black market exchange rate? Could be saying that. Robust and stable. Sorry, Julie, I'm asking you. Sorry, what was that?
Central Bank's Response to Parallel Markets
No, I'm saying, can you repeat your statement? Sorry, I didn't catch everything you said. I said the exchange rate. The Reserve bank says the exchange rate continues to be stable, benefiting from the resilience of the economy, particularly the country's foreign currency generation capacity, which remains robust. Does this accurately describe the development of both the fomo and the black market exchange rate? I hope you got that.
Market Stability and Realities
Well, yes, I did. So I mean, this comes back to, because oftentimes when we speak of the parallel market, the response from the central bank has been, this is illegal. We are going to go and arrest all the money changes because the right, the rate that they are presenting as the official rate is the rate that it should be and is stable. But as I said in my opening remarks, that even looking through the monetary policy statement itself, when you look at the exchange rates of gold to zig, you will see that there is an inflation of 10%, meaning that the zig has fallen in value in terms of gold, because gold prices globally have been decreasing in that period.
Discrepancies in Reporting and Reality
So even then, there is evidence and indication of that the value of the zig is not as stable as is being suggested in the monetary policy statement. And I wanted to make that circular analysis because that is what, using their own figures. So this stability that is being, you know, is being, it's not evident in the economy as we know, because when you look at the informal market, which is where the majority of transactions are happening, that this rate has not remained is almost, I think, twice as much now from the time that the zig was launched in April.
Concluding Thoughts on Currency Stability
So this stability that is kind of being defined and presented in the monetary policy statement is not what we are having in reality. And I think this is where then we think, why are we being forced down this path? There's a graph presented in the monetary policy statement, if you just bear with me, which is looking at the ratio between the foreign reserve stocks versus the local currency. And you can see that the economy is predominantly a dollarized economy.
De-dollarization and Market Responses
So this suggestion that we are moving towards a roadmap of de dollarization, mind you, de dollarization in itself doesn't really bear much mention in the monetary policy statements. So. And yet these statements, when said publicly, when said by the officials, have an influence on how the market will respond. As has been mentioned before by the previous speaker, that the market will then respond, anticipating that at any point we are going to be having de dollarization, which we've seen in the past. You don't necessarily get enough warning. So people want to quickly get rid of the zig and hold on to the US dollar. People also want to store value through purchase of commodities because they're thinking, at least if I do it this way, I'm not going to be left with Zig. That's going to deflate whenever de dollarization happens and so on.
Monetary Policy Statement and Economic Stability
The presentation and position given in the monetary policy statement is quite retrogressive to say this and then claim to be moving towards stability, to claim to be moving towards economic recovery. I don't believe that to be the case. I think we are in a situation where reading between the lines, we have inadequate reserves, the government cannot meet its short term obligations. We have now come up with liquidity committees. We will continue to print the zig, even though we will probably print beyond what is available in our reserves. But we will do it just so that we can meet our short term obligations. Although I'll saying that we are moving towards a program of de dollarization. And I think that is my conclusion in the aspects of statements such as the stability is to really try and hide the monetary supply injection of local currency. To say that because things are stable, because we anticipate de dollarization, therefore we're going to increase the use and supply of the local currency.
Inflation Measurement and Economic Indicators
Because I do not believe from what was presented in the monetary policy statement that government currently is maintaining a solvent and a surplus position, as they seem to suggest. Thank you for that. Chennai. Mister Chitamba. Chennai is arguing that the stability defined by the Arab is, it is not what is happening on the ground where the informal market, where usually the transactions are happening. The rate is now almost twice as much when the zig was introduced. So in your opening statement, Mister Chitambara, you talked about inflation. In Zimbabwe, we have two tier regime inflation, the Zim dollar inflation and the US dollar inflation, what does that mean to the economy? Oh, thank you so much. So obviously that in fact, we measure inflation at three levels. So the USD, the zig, and also the blended inflation.
Challenges in Fiscal Policy and Economic Stability
I think obviously that reflects the structure of the economy being a dual currency economy. So it's prudent to measure inflation using both the currencies that are in circulation and also coming up with a weighted inflation rate or a blended inflation rate. But of course, inflation is just one of the measures for stability, or lack of it. Another key stability that we use, especially in empirical modeling, is the black market premium. So that's also an indicator. And when it begins to widen, obviously then speaks to issues of instability. So we always, even the central bank, I had a meeting with the central bank last week, they are keeping a very close eye on the black market premium. And in fact, the mandarin policy implementation, monitoring and evaluation committee that's been established will also be seized with monitoring those key indicators.
Inflation Rates and Economic Policies
So then, of course there are other measures, but in terms of our, the USD inflation is fairly stable. And I always also compare with what's happening even in the US, we are slightly higher than the US when you look at our July inflation numbers, because the US, they've reached a low of around 2.9%. In July, Zimbabwe stayed at around 3.6%. But in the past, our blended inflation rate has been problematic because currently we don't have a blended annual inflation rate because the zig was just introduced in April. But they blended annual inflation rate before April in Zimbabwe was the second highest actually on the african continent. So in my view is that if we are able to sustain low and stable inflation for at least twelve months, I think that would be a strong signal in terms of incentivizing or in terms of the restoration of trust and confidence in the local currency, because ultimately, what any economic agent wants is a currency that maintains its value.
Impact of Fiscal Policy on Inflation
It's a currency whereby if you leave your money in the bank for six months, the value is not a thing, is not eroded. So your real incomes are actually not eroded when you have low and stable inflation. And we are saying for that to be actualized, we need fiscal prudence, we need mandalorian prudence. And in the case of Zimbabwe, obviously, I think the fiscal side has been the biggest driver or the biggest contributor to macroeconomic instability, because what has tended to happen in the past is that the government runs a deficit and it goes to the central bank for monetary financing that deficit, which then creates inflationary pressures in the economy. So if we are able to get things right in terms of our fiscal policy, fiscal prudence, I think definitely. But for that to happen again, it's going to take a lot of readjustments and even restructuring of public spending because there are a lot of inefficiencies in terms of our public spending.
Liquidity Market and Central Bank Functions
So I think it requires a comprehensive reform package that not only addresses the monetary aspects, but also, most importantly, the fiscal, and even the quasi fiscal aspects or side of things. Let me end prosper. We also thank our listeners. If you have just joined us in our experts. We are discussing the monetary policy today with our experts, helping us evaluating it, whether it is measured up to solving the challenges confronting the economy. And on our panelists with Proto Ashitambara, a development economist, and Chennai Mutambasere, who is also a development economist, and Stevenson Lamini, who is also an economics lecturer at the National University of Science and Technology. Now this express is brought to you by Alpha Media holdings, publishers of news days Babu, independence and the Standard, as well as art and soul broadcasting services.
Interest Rate Policy and Business Implications
Now, going forward, we will be asking our last question, and after our panelists respond to it, we are going to open to the floor. If some of our listeners want to participate, this will be your time. You can request to speak. Then we can give you the floor. Now, can I prosper? In Stevenson, we are noticing that the bank policy on interest rate will be maintained at 20%. What does this mean to businesses? Is this healthy? When you're looking at this policy rate, what does it mean to the business world? Maybe let me start by saying that, in fact, what were witnessing in the past, which the central bank is now trying to address in their exchange control, secular number three, is that people were actually finding it cheaper to actually borrow money from the bank, then use that money now to buy a foreign exchange from that very same bank because of taking advantage of the interest rate regime or policy, and also the widening in the black market premium.
Monetary Policy and Interest Rates
So I think it's something that the central bank obviously is trying to achieve. But the idea behind maintaining the interest rate at 20% is obviously informed by inflationary developments, because ideally you want your real interest rates be positive. So when inflation begins to rise, obviously it means the central bank would then have to adjust the nominal interest rate in line with changes in the inflation rate. So it's really a function of inflationary developments. So far, our inflation numbers up until July on the low side. So the central bank obviously then decided not to make any adjustments in terms of the bank policy rate. Okay, thank you so much for that. Doctor. Coming back to you, Chennai. Given the developments that are happening right now in the economy, can we maintain the inflation rate at less than 5%?
Inflation Target and Economic Challenges
Hi Chennai. Are you there? I think there is a technical glitch there. But can I throw the same question to you, mister Chitambara? Can you please take that? Can we achieve the 5% inflation target by year end? Yes, I think it's possible. But it means we have to stabilize the exchange rate. Especially when you look at the recent developments in terms of the power market, they are not very encouraging, both. Ultimately, if the premium continues to widen, obviously that will have strong inflationary implications. So it will mean that we may not be able to achieve that 5% inflation target by year end. But if we can be able to stabilize the exchange rate, then yes, it's very possible that we can actually attain that target of 5% by year end.
Expectations on Inflation Rates
Of course, there are other institutions are expecting around 20% inflation by year end. But the government, the central bank, is a bit bullish. Confident that we can achieve 5%. Some are saying probably 20% thereabouts. Hi, can you. Hi. Can I. Yes, I can hear you. I think you joined the party a bit late, but if you're also keen, I can throw the question to you as well. It's fine. I think if somebody else is speaking, I can wait. Mister Chitambaro, are you done? No, I was done. Actually, I was filling up for Chennai. And Steve. Thank you.
Key Factors Affecting Inflation
What I was saying, but I don't think you guys could hear me, is in terms of maintaining inflation, right? So you've got to really think about what are the key factors in determining inflation in Zimbabwe. What we have seen recently, we have had the issue of the Saddak summit and the arbitrary fiscal spending that has accompanied that. And unfortunately, as long as we are continuing to see these demand on fiscal that is arbitrary, that is beyond what we can afford and that is not tied to productivity, then inflation will never be arrested. In Zimbabwe, we will continue to be in a situation where we have a government that is overspending money that it doesn't have.
Impact of Overspending on Inflation
And when that happens, the response to address that kind of artificial demand, as it were, is through things like the printing of local currency, which introduces another layer of exchange rate dealing that only serves to compound the impact on inflation. So for us to really speak of arresting inflation or looking at stability in terms of inflation, then we are a long way away from that. We have a situation where I think it was mentioned before that we talk of de dollarization, but we've got no roadmap. So therefore we are seeing now, we saw recently the closure of some of the big supermarkets like pick and pay and so on and so forth, and they were bemoaning the increase of the informal sector.
Informal Market Dynamics
The fact that people can now access what their commodities through the informal sector, which has become somewhat cheaper and is able to address better price change. Prices are more stable because they're using foreign currency only in the informal market. People prefer to purchase from the informal market than they do the formal supermarkets that are closing down. So we have this situation where we are continuing to find ourselves back at the beginning. Every time we say we want to do introduce local currency, we've got a multi currency situation. We continue with the government expenditure, we've got fiscal and discipline, and as long as that will continue, we will never be able to come out of that cycle of persistent inflation and devaluation of the local currency.
Concerns About Reserve Bank Involvement
Does it really need the involvement that. Do we need that joint committee between the Ministry of Finance and the Reserve bank? Does it, will it not then continue to influence the Reserve bank to get involved in quasi fiscal activity that have cost us so much in the past, especially with regards to ballooning debt. I personally am not convinced. I feel that we need some independence. So the minister of finance has now also got the investment within it. I feel as though we have over consolidated that as a structure through this committee and we lose the independence, we lose the focus on the central bank that should be around inflation and we start to get the central bank involved in fiscal activities which should not be the case. So I must raise that as a point of great concern for me in terms of that committee. And I'm interested in finding out what the others think as well.
Importance of Central Bank Autonomy
No, thank you, Chennai. I think the issue I've raised, obviously it's an important point around the central bank autonomy. And it's been a major issue really in Zimbabwe. It's also been flaked out by the International Mandate Fund in their article four consultations. So I think that's a very fair point that we have actually made. And obviously there's merit in what you have said. Definitely the central bank must be seen to be not just seen, but also in reality, be strongly autonomous and independent, because that's what, that also obviously has a direct impact on macroeconomic outcomes, especially when you compare countries with strongly independent central banks. They also tend to have very low and stable inflation rates over time.
Transition to Closing Remarks
Yeah. Okay. Thank you so much for that question, Chennai. And thank you for taking that, mister. Rounding up silence will open the floor for the guests to ask questions to our panellists and also our panelists, may you please prepare your closing remarks looking at what you guys were talking about. Silence, over to you. Thank you so much, truly for that. We also thank our panelists for this discussion that we are having. While we are waiting for requests from our audience to participate, we would like to ask our panelists for their closing remarks. We start with Chennai, then Prosper, and then Stevenson, Chennai, you can go ahead and give your closing remarks.
Economic Structure and Reforms
I think for us to seriously consider the idea of a stable economy and the idea of stable inflation, we need a lot of structural reform. We need to address the politics. I highlighted the impact that the politics. So I feel like there's a lot of things that within the macroeconomic structure need to be addressed. We need to look at our fiscal spending. We need to be honest in terms of the rate of exchange, because we are continuing with this interchange market that is offering to those that can access discounted us dollar, but we're not seeing the value of that coming back into the economy. So we need to really go back. If they're saying it should be priced discovery, you should be willing buyer, willing seller, then let it be so. We shouldn't really, you know, that disparity between the parallel market and the official market is not serving the economy well.
Market Response and Corruption
That should be addressed we should be wary of how we influence the information asymmetries in the market because the market responds to big statements like we are de dollarizing, etcetera. And really the response of the market is not to the benefit of the economy. So we really need also some guidance in terms of the etiquette of the economy. What do we say? When do we say it? How do we address the issues of transparency so that investors feel comfortable operating in the market, so that they are not predict, they don't have to predict the element of risk because that contributes to inflation. The other thing as well is just in terms of, you know, I think we're still inadequate, especially in terms of addressing corruption. We remain silent.
Addressing Corruption and Economic Policies
It continues to be a blind spot for both the budget and the monetary statement. And yet this is one of the avenues, in fact the biggest avenue that the economy continues to lose money through. And yet we don't really see. I would have liked to see instead, you know, a multi stakeholder committee that is there to address the issues of corruption in the system, to reduce leakage through corruption, rather than this liquidity committee, because I'm failing really to understand its purpose and I'm failing to see the benefit that it will bring to the economy overall. We are coming into a period where we are still in a period of drought, we are still trying to recover from the effects of El Nino.
Monetary Policy and Economic Recovery
We are coming, I forget what the one says coming November is called, but we are not seeing a resilience forecast monetary statement where it is almost business as usual, even though they speak to tightening. We don't know whether I would argue that is not really a tightening stance as such. But how is that responding to the prevailing market conditions, especially in terms of the drought and the anticipated impact of further climate changes in the latter part of the year. So unfortunately, I really feel like this monetary policy statement, other than presenting a huge propaganda for Zika acceptance, it fails the litmus test of presenting a clear picture and roadmap of how the economy is going to be put on a recovery path, at least over the next six months.
Reflections and Closing Remarks
Thank you. Thank you for that. Chennai. She says quite a lot, fact, she's always saying quite a lot for me to actually come to, but thank you for that. Mister Chitambara, you're next. Can you please give us your closing remarks? Let me be very quick. Chennai has said a lot of the things that are important to highlight, but also in terms of our de dollarization roadmap, I think it's important that there is a consensus and unanimity. It must be clear but unanimous and based on the attainment of clear benchmarks, I think the role of, in terms of even engendering transparency, accountability and also confidence and trust in the whole system.
Institutional Reforms and Transparency
So we are still waiting for the minister of finance. He's going to probably articulate that. But the inputs are of key stakeholders, key economic agents in the economy definitely should be taken on board. And again, digitalization. My view has always been that it's not an event but a process that must be market determined, a market led process based, like I said, on attainment of key benchmarks around inflation, around reserves, and also even accompanied by institutional reforms to address issues to do with the autonomy independence of central bank, and also things like the leakages that Chennai has highlighted.
Conclusion on Economic Stability
So it must be, we need a comprehensive reform agenda that addresses the key binding constraints behind some of the economic issues that have been afflicting our economy. Thank you. Thank you for that. Lastly, Doctor Lamini, Chennai is saying the statement has showed the litmus test to give us a clear roadmap wireless. Mister Tamba says there is need for clear benchmarks and institutional reforms. What are you closing remarks? Thank you Trini. Perf allow me to start by correcting.
Monetary Policy Assessment
I'm not yet Doctor Lamini, he's still minister closing remarks out the realignment of interest rates that we see in the monetary policy statement and the assessment of the monetary conditions that we are seeing reflected in the recent secular by the Reserve bank all do suggest a proactive and a balanced approach by the Reserve bank to try and navigate economic challenges, foster stability and promote economic growth in this zig economy. So by focusing on maintaining currency stability, what a comprehensive strategy to try to address both the short term stability and long term growth objectives, because it's not always an easy tense to try and balance the two.
Collaboration Between Fiscal and Monetary Policies
When it comes to the issue of the minister of finance and RBZ committee, perhaps I might bring in a different perspective to say we need a co wage, we need a collaboration that brings consistency in policy in both the fiscal and monetary. We realize that they are focusing on the liquidity because we've been blaming the minister of finance for being responsible for the increases in liquidity that were not anticipated by the Reserve bank. So I believe that perhaps as they collaborate, their collaboration might not necessarily undermine the autonomy of the central bank, but bring transparency and clearer communication between the two ministries to avoid any contradictions in their policy initiatives, but to bring complementarity.
Future Projections and Economic Growth
And I would say perhaps on the issue of closing the year at 5% inflation that might possible, because let's look at, let's also bear in mind that this monetary policy review statement uses statistics right up to end of June, not the current two months that we have experienced. So perhaps that we also are anticipating that the IMF staff monitored program will be commencing anytime soon to try and complement these efforts that are currently underway. We hope that as they come in, they will augment the efforts to try and maintain a tighter liquidity stance, at the same time not undermining the productive sectors because we need lending towards the private sector, that will stimulate productivity, that will stimulate economic growth.
Final Thoughts
So my closing remarks in that nature, Julie. Thank you so much. Mister, I think I'm always seeing as a doctor, you need to one soon. And then we had a request from Njabula. I think it would be a case of injustice if we just close this off without one contribution. Njabulo, are you still there? I think, I think we might have lost him. I can't see him again. Silence. Over to you. You can close it off.
Ending Remarks and Future Discussions
Well, thank you. Thank you, our listeners. Thank you, our panelists, for this fruitful discussion. Now, tonight in our experts, were discussing the monetary policy, whether it has satisfied the challenges that the economy is facing, or whether there is still some work that needs to be done for the economy to recover. Key points were raised by our panelists. We had prospectambara with a development economist, Chennai M. Tambasere, who's also a development economist, and Stevenson Lamini, who is a lecturer at the National Investor of science and technology.
Engaging with the Audience
We will be bringing you these every week to discuss various topics, be it the economy, business, politics, and other issues that include health that affect the general population. If you also have proposals, just dm us on our X account. You can dm on Zimbabwe, Independent News day and the Standard so that we can take that up and plan accordingly. This is your platform, and all these discussions are meant to benefit the public. Learn some lessons and also be learning from you.
Open for Suggestions and Future Engagement
So our platforms are open for proposals on discussions that you feel they are important and they need to be discussed at length. You may also suggest speakers that may, that you feel you have the knowledge to articulate certain subjects that we present to you. We encourage you to download our all in one app, which is a new mobile news app, to have access to all our publications. It's called Alpha Media. All in one app.
Conclusion and Thank You
On that app, you access the news day, the Standard in this map. We're independent, of course. We have certain content there under a paywall, which means you may be required to pay for certain novel and compelling content that we create only for you. We thank you for listening, and we will see you again next week as we bring another topic for discussion.
