Surprise as dollarised Zimbabwe sets up monetary policy committee

Surprise as dollarised Zimbabwe sets up monetary policy committee
Published: 12 April 2012 (9017 Views)
Zimbabwe's Reserve Bank has surprised the investment community by setting up a monetary policy committee (MPC) as the country's authorities no longer have a monetary unit to control.

The oddity is noted by Imara, the pan-African financial services group, in an analysis of dollarisation's effects on the Zimbabwean economy.

The assessment – part of Imara's information-led effort to attract continuing investment into Zimbabwe – is being circulated to international fund managers.

The Zimbabwe dollar became worthless more than three years ago and was abandoned by the authorities. The US dollar then became the nation's de facto currency.

John Legat, Harare-based director responsible for group asset management, confessed that Imara was "somewhat surprised" by the Reserve Bank's decision to form an MPC.

He told clients and international investment fund managers: "An MPC is now the norm in most countries around the world, BUT in countries that have their own national currencies.

"Zimbabwe does not have its own currency, but has in effect adopted the US dollar. The US dollar is managed by the US Federal Reserve which determines the monetary policy and hence interest rates.

"We are fascinated to know what Zimbabwe's MPC might discuss at their meetings since they will have no control over interest rates or US monetary policy."

In Legat's view, the lack of government control over Zimbabwe's currency is one of the positives flowing from dollarisation.

He explained: "Indeed, it is for that reason that countries adopt the US or another country's currency, especially in times of economic meltdown or political uncertainty, as we had in Zimbabwe in 2008/09.

"In other words, the currency in use cannot be manipulated by the local government or monetary authority, thereby allowing private sector confidence to return to the economy and ultimately the banking system."

Government's inability to disguise economic problems through inflation and currency manipulation bestowed certain advantages on Zimbabwe.

Legat noted: "Because the Government cannot borrow, it has to run a cash budget, making it one of the few countries to do so, an enviable position indeed!

"What the Zimbabwe government can and should focus on, then, are the supply side reforms that would make the economy more efficient and attractive to the private sector – both domestic and foreign."

To do that, a different type of committee may be needed.

"Rather than establish an MPC," said Legat, "government should establish a committee of technocrats to work on supply-side reforms to the economy so as to allow the private sector to flourish in a full market economy.

"Unfortunately, it will likely take time for the Zimbabwean authorities to cede micro and macro management."

- Byo24News

 0

You May Like These Videos

Comments

There are no comments.

Latest stories

France beat Croatia to win SWC

by Sports24 | 15 July 2018 | 114 Views

Why army warning is omnious

by Siphosami Malunga | 15 July 2018 | 264 Views

2 separate funerals for MUgabe's prophet

by Staff reporter | 15 July 2018 | 260 Views

Tribal tensions intensifies in Matebeleland

by Staff reporter | 15 July 2018 | 172 Views

Chicken Inn beats Nichrut

by Staff Reporter | 15 July 2018 | 97 Views

Makokoba man drinks himself to death

by Staff Reporter | 15 July 2018 | 135 Views

ZEC dismisses Chigumba resignation report

by Stephen Jakes | 15 July 2018 | 188 Views

Mnangagwa accepts that women should not lead!

by Tendai Ruben Mbofana | 15 July 2018 | 179 Views

674 graduate at Masvingo Poly

by Staff Reporter | 15 July 2018 | 94 Views

Obert Mpofu, Mudenda get Mnangagwa praise

by Staff reporter | 15 July 2018 | 116 Views

Does Njelele hold the keys?

by Staff rpeorter | 15 July 2018 | 108 Views

ZEC commissioner receives death threats

by Staff reporter | 15 July 2018 | 125 Views

$400m for roads rehabilitation

by Staff reporter | 15 July 2018 | 96 Views

Glamour has left Dynamos

by Staff reporter | 15 July 2018 | 115 Views

'Be principled' says Khaya-Moyo

by Staff reporter | 15 July 2018 | 64 Views

Jonathan Moyo's STEM re-launched

by Staff reporter | 15 July 2018 | 116 Views

Gurira to break bank with blockbuster Hollywood roles

by Staff reporter | 15 July 2018 | 104 Views

Chamisa wants SADC, AU to run elections

by Staff reporter | 15 July 2018 | 96 Views

Chiwenga promises modern apartments with swimming pools for Mbare

by Staff reporter | 15 July 2018 | 96 Views

Postal votes scam and the forgotten postman

by Tawanda Majoni | 15 July 2018 | 102 Views

Chamisa warns Mnangagwa

by Staff reporter | 15 July 2018 | 108 Views

Zanu-PF supporters in fierce clashes

by Staff reporter | 15 July 2018 | 120 Views

Mnangagwa had never seen such a huge crowd

by Staff reporter | 15 July 2018 | 128 Views

Chigumba hits back at critics

by Staff reporter | 15 July 2018 | 107 Views

Strive Masiyiwa bailed Mugabe's govt out

by Staff reporter | 15 July 2018 | 117 Views

Trust, not arrogance, will deliver a good election

by Zifiso Masiye | 15 July 2018 | 80 Views

Fears of military interference persist as Zanu-PF denies backing

by Nkosana Dlamini | 15 July 2018 | 98 Views

Winky D 'endorses' Chamisa

by Staff reporter | 15 July 2018 | 107 Views

AfDB signs agreements with Zimbabwe firms

by Staff reporter | 15 July 2018 | 58 Views

Mohadi brother buried

by Staff reporter | 15 July 2018 | 63 Views

Postpone Zimbabwe's elections and address serious issues of concern

by Zimbabwe Election Watch | 15 July 2018 | 77 Views

Chamisa vows to rename Zimbabwe

by Staff reporter | 15 July 2018 | 53 Views

Mnangagwa has already won elections

by Staff reporter | 15 July 2018 | 50 Views

92,000 'ghost voters' still on new roll

by Staff reporter | 15 July 2018 | 41 Views

Mugabe's tactics persist in first election without him

by WashingtonPost.com | 15 July 2018 | 84 Views

Zanu-PF taken to court

by Staff reporter | 15 July 2018 | 42 Views