ECONOMIST and former MDC legislator Mr Eddie Cross has hailed the 2019 Reserve Bank of Zimbabwe (RBZ) Monetary Policy Statement and believes it will play a major role in stabilising the pricing system in the economy.
The Apex Bank Governor, Dr John Mangudya, presented his policy statement on Wednesday during which he announced a raft of measures designed to preserve the purchasing power of RTGS money and restore export competitiveness within the economy.
The crux of the policy interventions was the establishment of an interbank foreign exchange market, putting in place of a local nostro foreign currency accounts settlement platform, among other guidelines aimed at ensuring stability and resilience of the financial system through a macro-prudential framework.
In an interview, Mr Cross said formalisation of the forex exchange market will go a long way in eradicating the forex black market and stabilising prices of basic commodities.
“It’s a step in the right direction especially looking at the establishment of the formal forex exchange market. What it means is that the forex prices will stabilise and the forex black market will eventually disappear,” he said.
Mr Cross concurred with the RBZ that the new measures were expected to stabilise and reduce prices of commodities in the long run.
“Definitely, prices of most goods are expected to drop following the freeing up of the exchange rate. The prices have increased as they chased the exchange rate but after the formalisation and stabilisation of the market, prices will definitely fall,” he said.
The RBZ interventions come on the back of an outcry over pricing distortions and rent-seeking behaviour in the market, which is largely blamed on the thriving parallel market exchange system. The new measures mean that the Government has abandoned the previous 1:1 exchange rate between the Bond note/RTGS balances against the US dollar.
Mr Cross, however, said the exchange control mechanisms should be totally abolished in the long run to allow market forces to be at play.
“I really feel exchange rate controls should be totally abolished altogether as they have a negative impact on the economy,” he said.
The monetary statement provisions, Mr Cross said, also compliment the austerity measures announced by the Minister of Finance and Economic Development, Professor Mthuli Ncube, in his 2019 budget.
“Indeed, the monetary policy is in tandem with Mthuli’s fiscal budget and I strongly think the two complement each other and in the long run the economic questions will be answered,” he said.