Mthuli Ncube Implored To Avoid Announcing Monetary Policy Measures
Economists have implored Treasury to desist from announcing monetary policy measures saying this undermines the role of the Reserve Bank of Zimbabwe (RBZ) in restoring confidence in the market.
The call came after Finance and Economic Development Minister Mthuli Ncube and the RBZ’s Monetary Policy Committee (MPC) recently made contradicting pronouncements on macroeconomic and financial developments in the economy.
In his statement, Ncube said all export proceeds that remain unutilised after 90 days will be liquidated onto the interbank market.
However, the MPC said, “in order to ensure that the interbank forex market is self-financing, the 90-day liquidation requirement on export proceeds will fall away”.
Speaking in an interview with Business Weekly, Zimbabwe National Chamber of Commerce (ZNCC) chief executive officer Christopher Mugaga Treasury should avoid announcing monetary measures. Said Mugaga:
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The Treasury should avoid announcing monetary measures because the central bank has never announced fiscal measures.
We are imploring the Treasury that any statement they think is necessary to the market, they can actually co-issue it or co-sign it than have a statement on monetary issues coming from the Treasury.
The signal that is created is that when the market starts losing confidence in the central bank, the sentiment will be like the Treasury does not have confidence in the central bank and once that happens even the currency issued by the central bank loses value because the market does not have confidence.
What makes people accept the currency is believing that the currency has value.
What needs to be solved possibly is the conflation of these two institutions (Treasury and RBZ) because it will create a challenge in the future, conflation in the sense that the central bank should never ever enter the arena of fiscal activities, either quasi-fiscal activities or fiscal.
In a separate interview with the publication, another economic commentator Wendy Mpofu said:
By announcing monetary policy measures, the Treasury is creating confusion in the market as announcements of such is the prerogative of the RBZ.
Once that happens it also works against the restoration of confidence in the financial market.
Meanwhile, International Monetary Fund (IMF) has urged Zimbabwe to fully liberalise the foreign-exchange market to allow the rate to be determined by market forces.
More: Pindula News
