Govt Will Not Commit Suicide By Allowing Market To Determine Exchange Rate - Mangudya

Reserve Bank of Zimbabwe (RBZ) governor John Mangudya has said that as long as he is in charge at the central bank, the government will never allow market forces to demand the exchange rate between the United States dollar and the bond notes. Despite ordering banks to separate the Nostro Foreign Currency Accounts (FCAs) from real-time gross settlement (RTGS) FCAs, Mangudya said the two types of accounts will never be delinked as this would be suicidal. Speaking to the Sunday Mail, Mandudya said,

…When we dollarised, the quantum of money from the RTGS was low and could not dilute the foreign currency. However, over a period of time, we increased the electronic dollars and it has been reducing the motivation for those with their own foreign currency…We are working on the pre-requisites in this economy for a currency reform agenda; that would be suicidal.

Let me repeat, it would be economic suicide for this economy if the Government of Zimbabwe was to do that (free-float exchange rates. That would mean overnight, people will offload their RTGS balances and purchase the little foreign currency that is on the market. It will bring distortions in the market and prices will go up overnight. By doing so, it will be inflationary and you are going to ask for higher salaries and at the end of the day, we will have spillover effects.

More: Sunday Mail