Breaking News

Equilibrium of the exchange rate needs holistic approach

by John Sigauke
06 December 2018 | 863 Views
After being kissed by the devil, one must not be over excited. Instead, they have to count their teeth, lest one or two are missing.

Businessman and cleric, Shingi Munyeza was showered with praises by people who used to chastise him, accusing him of pushing Zanu PF agenda. The praises came after he posted on twitter, some ideas that resonate with the MDC narrative.

Dr Munyeza said in order to bring back credibility and confidence, the August Inquiry must be made public as soon as possible, cases of corruption must be expedited, MDC Alliance and Zanu PF must come to a negotiating table. The availing of the inquiry findings on public domain has been explained enough, so is the push for a dialogue between the two main protagonists.  As for cases of corruption, one has to be wilfully blind to ignore the arrest of big shots over the vice.

Munyeza said the United States dollar (USD) is not equivalent to the bond note. He also said Government must allow the selling of fuel in USD and open up fuel importation.

It is on the last two propositions that this writer disagree with Munyeza. There is a serious shortage of USD in the country and for one to suggest that the commodity must be sold in that scarce currency is a bit selfish. As a businessman, Dr Munyeza could be selling his products or services in USD, making it easy for him to purchase fuel should his suggestion is carried. He, however, forgets that a whole lot of motorists are still being paid in RTGS including those in critical service sectors like doctors. I guess he heard the Minister of Health and Child Care unequivocally dismissing the doctors' demand for payment in USD.

Those who eulogised Munyeza on social media for proposing the sale of fuel in USD were carried away by politics and forgot that they are still being paid in RTGS. Proposing to sell fuel in USD to the public that has no access to that currency is capitalistic. The fuel industry is being allocated foreign currency to procure fuel, thus, there is no reason to sell it in USD. Once fuel is sold in USD, everybody who uses it in the production chain will in turn charge their products in the same currency. Indirectly, Munyeza and the like-minded want to demonetise the bond note.
In his 2019 budget, the minister of Finance and Economic Development said the bond note would remain pegged at one as to one with the USD. However, there has been a relentless call to let the bond note float freely within the multi-currency system. Munyeza is one such voice that wants the bond note to be devalued.

The surrogate currency was introduced in 2016 as way of ameliorating acute cash shortage within the market. The challenges that birthed its introduction have not improved, thus its maintenance on the market on a 1:1 with the USD is still welcome. The bond note has been in use on equal footing with the green pack since 2016 without any problem. The problem only came after elections in which President Emmerson Mnangagwa won despite contestation by his closest rival, Nelson Chamisa. That shows that what is happening has nothing to do with economic fundamentals.

Devaluing the bond note would be tantamount to giving in to the saboteurs on the parallel market who are determining the exchange rate. Once that is done, the whole nation will be held at ransom by these saboteurs. They will peg the exchange rate anyhow and any time.




The principal objective for the introduction of the bond note was macro-economic stability especially on the formal exchange rate. The bond note/USD exchange rate must remain on a 1:1 so as to preserve values of people's salaries, pension, balance sheets of companies and financial institutions. In doing this, Government is trying to avoid a repeat of the 2009 scenario where savings were wiped away following the adoption of dollarization.

The excessive growth in money supply has been the major source of instability. There is excessive liquidity in the economy which is disproportionate with the quantity of physical cash circulating in the country and level of production within the economy. If this situation is not addressed, we cannot address the exchange rate challenges sustainably.

Government can achieve proper equilibrium of the exchange rate by dealing with twin deficit on the fiscal and current account front, money supply, excessive monetary expansion, interest rate differentials with trading partners, inflation differential with trading partner and purchasing power parity issues. Thus, the thrust of the Transitional Stabilisation Programme is to deal with inflation and instability by addressing these macro-economic challenges.

On fiscal deficit, Government is implementing cost-cutting and revenue generating measures. In his budget, Professor Ncube proposed the cutting of salaries for senior Government Officials and other luxuries are to be forgone.

The 2% taxi is to widen revenue source base. Revenue is being generated through reforming the State Owned Enterprises where others will be privatised, liquidated, departmentalised and listed on the Zimbabwe Stock Exchange. Bidders will buy shares and a windfall of $500 million is expected to be generated from the privatisation. Most of these enterprises have been perennially getting bailouts from Government.

So the issue of equilibrium of exchange rate needs to be addressed holistically. To just come up with figures as exchange rates without addressing the issues discussed here is sustainable. 


RTGS USD Munyeza holistic approach


Disclaimer:
All articles and letters published on Bulawayo24 have been independently written by members of Bulawayo24's community. The views of users published on Bulawayo24 are therefore their own and do not necessarily represent the views of Bulawayo24. Bulawayo24 editors also reserve the right to edit or delete any and all comments received.

Source: John Sigauke

Comments

Latest News

Christianity and the Curse of the Papa Generation

by Robert Sigauke | 16 February 2019 | 174 Views

Avalanche of blunders gives Mangudya guts to challenge 'Tzar' Ncube - ...

by Nomusa Garikai | 16 February 2019 | 516 Views

Tribute to 'Save' the late Dr Morgan Richard Tsvangirai

by Leonard Koni | 16 February 2019 | 106 Views

Zimbabwe shelves plans to join Africa Continental Free Trade Area

by newzimbabwe | 16 February 2019 | 133 Views

Ways Winky D & Gemma Griffiths (Mu garden) song should educate ZANU PF...

by Don Chigumba | 16 February 2019 | 169 Views

24 bodies retrieved from the Battlefields Mine disaster

by Staff reporter | 16 February 2019 | 645 Views

High Court blow for Mnangagwa's PG

by ZimLive | 16 February 2019 | 897 Views

WATCH: 8 miners pulled out alive after 5 days in flooded tunnel

by Reuters/ZimLive | 16 February 2019 | 440 Views

'Magaya church not paying tax'

by Staff reporter | 16 February 2019 | 144 Views

EU tightens screws on Mnangagwa - THE European Union (EU) is set to ha...

by Staff reporter | 16 February 2019 | 426 Views

Chamisa 'the chosen one' ring-fences presidency

by STaff reporter | 16 February 2019 | 375 Views

Mnangagwa sued over NPRC lifespan

by Staff reporter | 16 February 2019 | 192 Views

Lightning strikes family, kills mother - TRAGEDY hit a Rusape family o...

by Staff reporter | 16 February 2019 | 222 Views

Research key to economic development: Mnangagwa

by Staff reporter | 16 February 2019 | 41 Views

Thomas Mapfumo claims $1,2 million defamation damages

by Staff reporter | 16 February 2019 | 230 Views

Zimbabwe moots stop and search roadblocks

by Staff reporter | 16 February 2019 | 259 Views

Mugabe's top cop sued over $167,000 electricity debt

by Staff reporter | 16 February 2019 | 137 Views

Beitbridge refuse collection worker crushed by truck - A BEITBRIDGE re...

by Staff reporter | 16 February 2019 | 122 Views

Mnangagwa ducks CEO Africa roundtable - PRESIDENT Emmerson Mnangagwa y...

by Staff reporter | 16 February 2019 | 114 Views

MDC Alliance senator for Hwange acquitted - A MAGISTRATE has acquitted...

by Staff reporter | 16 February 2019 | 62 Views

Perm sec's wife arrested at Supa's trial - THERE was drama at the Hara...

by Staff reporter | 16 February 2019 | 207 Views

Salad cream intercepted at border - AUTHORITIES at Beitbridge Border P...

by Staff reporter | 16 February 2019 | 150 Views

Jonathan Moyo lawsuit crumbles

by Staff reporter | 16 February 2019 | 155 Views

Granny killer sentenced to death - A BEITBRIDGE man, who waylaid a 65-...

by Staff reporter | 16 February 2019 | 136 Views

'Expelled' FOG members take founder to court - THE founding leader of ...

by Staff reporter | 16 February 2019 | 120 Views

Zanu-PF slams US big brother mentality - ZANU-PF has condemned the Uni...

by Staff reporter | 16 February 2019 | 65 Views

Zifa to bring Warriors games to BF - ZIFA president Felton Kamambo has...

by Staff reporter | 16 February 2019 | 81 Views

BCC ordered to stop mining activities - THE Government has ordered Bul...

by Staff reporter | 16 February 2019 | 59 Views

Man beats up police officers, throws plate of sadza at them - A tout h...

by Staff reporter | 16 February 2019 | 151 Views

Entertainment

HIFA 2019 cancelled

by Mandla Ndlovu | 15 February 2019 | 541 Views

WATCH: Jah Prayzah and Misred drop Kunerima video

by Mandla Ndlovu | 12 February 2019 | 5213 Views

Call to honour Cont Mhlanga

by Staff reporter | 12 February 2019 | 1592 Views

Mr Yada Yada slays the slay-queens

by Nigel Siziba | 10 February 2019 | 2968 Views

Misred meme goes viral online

by Staff reporter | 08 February 2019 | 8877 Views

Babongile Sikhonjwa leaves Skyz Metro FM

by Mandla Ndlovu | 07 February 2019 | 2188 Views

Valentine's treat for maskandi lovers - The countdown to the day reser...

by Staff reporter | 06 February 2019 | 920 Views

PHOTOS: Zodwa Wabantu buys a coffin worth R150 000

by Mandla Ndlovu | 06 February 2019 | 5113 Views
iBlog

Ios 9 Features Inspired By Android

apple announced ios 9 on monday, and while watching the keynote, i had just a little bit of déjà vu. most of ios 9's new features seem to be squarely aimed at apple's biggest rival in mobile: android. specifically, they were about catching up to ... Read More
Sergey 13 June 2015 ago

Tb Joshua Worst Enemy Angelique Tonge Exposed

About two years ago, we came out emphatically about those behind the t.b joshua watch. many were those who thought we were framing innocent people up or on a witch hunt. some events have vindicated us and the cat is out of the bag. it is said that no... Read More
pointblank 01 May 2015 ago