The new Monetary Policy Committee (MPC) and Reserve Bank of Zimbabwe (RBZ) boards face a daunting task in dealing with the country’s monetary problems and bring the much-needed stability and confidence in the market.
These problems range from the cash crisis, banks’ liquidity crunch and land bankability.
On Tuesday, Finance minister Mthuli Ncube appointed RBZ and MPC boards chaired by central bank governor John Mangudya to have oversight over monetary matters.
Other members of the RBZ board are Kumbirai Katsande, Zvinechimwe Churu, Busisa Moyo, Matilda Dzumbunu, Edwin Manikai, Lindiwe Sibanda, Emma Fundira, Caleb Fundanga, Belinda Musakwa and Jerry Parwada.
Economist Kipson Gundani said the appointments were in line with the RBZ Act.
“I think it’s highly necessary for oversight and bringing independent reasoning,” Gundani said.
But another economist John Robertson believes there is not so much that the new boards will do as their hands are tied.
“It’s very difficult to say this is a welcome move because we don’t know whether their ideas will be acceptable. We will discover that their hands will be tied. I expect them to bring new ideas to have things work, but quite often, the mechanism is that they serve according to the whims of appointing authorities.
The Reserve Bank of Zimbabwe is technically experiencing financial difficulties,” Robertson said.
“One of its functions is that it should carry the country’s reserves, but it hardly has reserves. There is large labour force and there is need to cap the force. We will wait to see how much they will change and whether their ideas will be accepted or rejected.”
Members of the MPC are Ashok Chakravarti, Douglas Munetsi, Marjorie Ngwenya, Eddie Cross, Theresa Moyo, Katsande, deputy governor Kupukile Mlambo and Jesiman Chipika.
As Mangudya prepares the mid-term monetary policy, there is need to bring the much-needed confidence in the banking system.
Such confidence can filter in the sector if authorities pay attention to the deepening cash crisis, which started in 2016 as result of excessive money creation through Treasury Bills and overdrafts. Soft money, therefore, became dominant to the detriment of physical cash.
These distortions have had huge implications on the economy. Since then, authorities have failed to stem what has now become a chronic cash crisis.
The new boards also ought to stabilise the beleaguered banking sector.
Zimbabwe’s banking sector is skating on thin ice due to a liquidity crunch that has drastically reduced the financial institutions’ capacity to lend following the reintroduction of a local currency.
According to a report by brokerage research firm IH securities titled The Zimbabwe Banking sector: Navigating a challenging monetary space, released recently, the currency reforms created a mismatch between foreign currency-denominated assets and liabilities on some banks’ balance sheets.
The distortions have stifled the financial institutions’ lending capacity.
Since the land reform programme at the turn of the millennium, monetary authorities have failed to deal expeditiously with the issue of the land market value to back up bank loans.
Banks have refused to give farmers loans using 99-year leases as collateral, arguing that the leases are not bankable.