I Realised In October 2018 That USD1:1 Bond Was Not Working – RBZ Governor

Central bank governor John Mangudya on Friday addressed a Daily News Breakfast meeting on the MPS2019. At the end of his address, Mangudya responded to questions from his audiences. Below are some of the questions and responses, as well as remarks by business leaders and economists:

  • Asked on his promise to scrap the Bond Note, Finance Minister Mthuli Ncube said: There was a monetary cost as the governement needed to replace the bond notes with actual USD. There was also a social cost to scrapping. There is a way we will proceed and I cannot say it now. When I said “domestic currency in 12 months”, I was preparing you months for these monetary measures.
  • Question to Dr Mangudya: When did you realise that $1:1 doesn’t work and a cost to exporters? When the markets ran away in October 2018 and when inflation set in I realised we needed to change and $1:1 can’t uphold.
  • Dr Chakravaat: The Private sector needs to exercise restraint and act in a manner that is responsible and allow the market to work. The measures put in place are like a robot at the centre of a busy city centre. The Governor needs to make sure that the robot is working at every material time.
  • Dr Mugano: We need a clear Policy for import substitution and avoid using forex on useless imports which put pressure on the exchange rate.
  • Dr Robertson: The Governor took a brave stage and I applaud him for that. We have an easy solution by colletarising the land. We have a self-inflicted problem where today we use millions to import food. Let’s have securities land and an open door for massive lines of credit.
  • Denford Mutashu: We also need a strong system of social safety nets in order to cushion our people. The bulk of our budget is pro-poor and we have extended this to cover the Urban areas (Mthuli Ncube).
  • MthuIi Ncube on Steve Hanke: I have no quarrels with Steve Hanke and his method of calculating inflation. He is pointing us to what we should be worrying about and we take note.
  • What happens to Treasury Bill holders that bought the bills at $1:1 prior to Bond Notes or volatility: TBs are electronic dollars and are hence treated as such. They will be settled as electronic dollars (RTGS Dollar). The RBZ will publish all average exchange rates in the market in all daily newspapers to ensure transparency in the market. Banks will give the RBZ the schedule of all customers who have been allocated forex – Dr Mangudya.

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