Trust new dispensation – Mthuli

Zimbabwe finance minister Mthuli Ncube presents his budget statementon November 22, 2018 in Harare.

Finance and Economic Development Minister Professor Mthuli Ncube has called on citizens to trust the new dispensation, saying since coming into office, it has “walked the talk” and is determined to turn around the fortunes of the economy.

Prof Ncube said this last week in Parliament in response to a question by Norton MP Temba Mliswa, who had alleged that citizens can no longer trust Government due to policy changes.

“I thank the honourable member for that spirited question. First of all, he must trust us, the nation must trust us; the reason being that we walk the talk on everything we say,” said Prof Ncube.

“We said we would stabilise Government finances, we will institute fiscal discipline (and) we have done that.
“We also said we were going to reform the monetary system; we have done that. We have also said we continue to fine-tune the monetary set-up; we are doing that.”

Prof Ncube said they are fine-tuning the interbank market to make it easier for industrialists to access the US$800 million in nostro foreign currency accounts (FCAs).

This comes at a time when Reserve Bank of Zimbabwe (RBZ) Governor Dr John Mangudya indicated that a further US$500 million would be released into the market yesterday to support the interbank market.

“Government, through the RBZ, is drawing down US$500 million on Monday, 20 May 2019 (yesterday), to supply the interbank forex market to meet the forex payment requirements of business and individuals,” said Dr Mangudya.

He added that the US$500 million will go a “long way” in stabilising the exchange rates and prices of goods and services in the economy.

Prof Ncube says Government wants the interbank market to work “efficiently” and become the major source of forex for industrialists to ensure low prices of goods and services.
“. . . we will continue to fine-tune the market so that it works efficiently.

“There is foreign currency in the nostro accounts of about US$800 million and we need to make sure that we fine-tune the market so that those monies are released onto the market and everyone can access the foreign currency through the interbank market,” said Prof Ncube.

The interbank market was introduced on February 20 to formalise forex dealings to prevent industry and individuals from resorting to the parallel market.

The interbank came at a time when parallel market dealings in forex had been outlawed by Government and attract a 10-year jail term for anyone caught dabbling in it.

Government wants market forces to determine the forex rate on the interbank.
The interbank rate opened at USD1:2,5 RTGS$, but has steadily risen to 1:3,4832 as of yesterday.

Industrialists say they face challenges in accessing forex on the interbank market, and turn to the parallel market where rates are volatile, resulting in incessant price increases.

Prof Ncube acknowledged that businesspeople were getting forex from the parallel market but called on them to resort to the interbank which is being fine-tuned to increase efficiency.

“It is certainly true that businesspeople are sourcing money from the parallel market, otherwise it wouldn’t be existing in the first place, and they use this for pricing goods and so forth.

“And our argument is why do it (get money from the parallel market) when you have got an interbank market?” he said.
Exporters are said to be withholding their forex waiting for a “higher rate” that is close to, or at par with parallel market rates of 1:5,3 as of yesterday.

The tendency by industrialists to source forex on the parallel market, where rates are on the higher side, has largely been responsible for destabilising prices.

But Prof Ncube insists that the obtaining macro-economic fundamentals don’t support a higher rate of forex.
“The fundamentals don’t support it (a higher rate, if you look at) growth in money supply and the current account deficit. They don’t support that.

“Therefore, players must move back to the interbank market because we believe that is where the market ought to be. But we continue to fine-tune the market in this multi-currency regime,” he said. – Herald