Zimbabwe: Mangudya Sets Tone for Recovery

RESERVE Bank of Zimbabwe (RBZ) governor John Mangudya has confirmed the economy is in a crisis, requiring urgent corrective measures but lamented the tools to stir Zimbabwe out of the mess are difficult to find.

Mangudya said this in his maiden statement since resuming the reins at RBZ on May 1.

"Whilst the Reserve Bank has no tools at the moment to influence the economy directly, I believe that its greatest strength rests on relationship management, policy advice and the ability to put in place national beneficial financial structures to increase liquidity and resuscitate the economy so as to unlock value in the economy and to work towards meeting some of the critical objectives enunciated in Zim Asset," he said.

Mangudya moved to calm market fears last week saying the multicurrency regime would be retained as speculation swirled that the banished local unit could be brought back.

"The Reserve Bank is also expected to promote a strong and stable financial system and to ensure that the multiple currency system is buttressed and maintained to restore and enhance confidence and credibility," he said.

"The multiple currency system is sine qua non [requirement] for turning around the fortunes of the economy."

Former Finance minister Tendai Biti told our sister paper, The Zimbabwe Independent recently that government could be forced to reintroduce the Zimbabwe dollar as a desperate measure to expunge growing domestic debt and manage its wage bill.

"My real fear is they will decide to bring back the Zimbabwean dollar to monetise their arrears and the revenue gap," Biti said.

An executive at a local commercial bank said Mangudya was clear on the crisis at hand.

"He rightfully said that it's not going to be easy. One hopes that he will be able to carry out his duties without interference, not necessarily from politicians, but predecessors. He is not promising heaven on earth," he said.

"The biggest thing is to acknowledge that there are serious challenges that need to be addressed. A lot of what he said is not new but was bogged down on the implementation stage."

Mangudya said there was "need to find an equilibrium position or a point of harmony between the need to promote indigenisation and the need for foreign direct investment and the ability to synchronise the two" in tandem with his predecessor Gideon Gono and Finance minister Patrick Chinamasa.

His call for flexibility on indigenisation, analysts say, has the underlying message that the country cannot go it alone.

"He is saying that we have to make the country a destination of choice for FDI. From a government perspective, it needs to follow through the statements and even make necessary amendments," a bank economist said.

Independent economist Moses Chundu said in the absence of monetary policy tools, Mangudya's hands would be tied.

"The instrument he has is moral suasion. In the scheme of things, the central bank governor becomes a very small player," he said.

Chundu applauded Mangudya for raising concerns about the effects of indigenisation, adding that government had to move with speed to put legislation which calmed the nerves of investors.

"When you say you are flexible, it introduces rent-seeking behaviours. What is needed is a Statutory Instrument to capture the new changes," he said.

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