On a positive note the RBZ has made an undertaking to protect free funds held in individual and corporate FCAs. This Monetary Policy Statement is issued in terms of Section 46 of the Reserve Bank of Zimbabwe Act [Chapter 22:15], which requires the Governor of the Reserve Bank to produce a Statement of Monetary Policy giving an account of the monetary policy measures pursued in the preceding six months and the new measures to be pursued in No further details are given. In his Monetary Policy Statement the Governor said: “The RTGS dollars shall be used by all entities (including government) and individuals in Zimbabwe for the purposes of pricing of goods and services, record[ing] debts, accounting and settlement of domestic transactions.”. It has lost value due to hyperinflation. In a covert fashion, those sectors mentioned above simply index prices to the usd. Hence the directive is not binding on them. The Reserve Bank of Zimbabwe (RBZ) lacks the reserves to maintain the value of the local currency, meaning that demand for US dollars will persist. The Governor of the Reserve Bank of Zimbabwe delivered his Monetary Policy Statement on the 20th February and, amongst other measures, announced the following: Within a commendably short time two legal instruments were gazetted to give effect to these measures: On the 22nd February the Reserve Bank issued a Directive to Authorised Dealers, RU 28/2019 [link], to implement further aspects of the Monetary Policy Statement. In terms of section 46 of the Reserve Bank Act, the Governor is obliged to present a Monetary Policy Statement setting out measures to, inter alia, controlling Money Supply, Targeting Inflation for price stability, managing the exchange rate, stabilizing the financial sector, setting the bank rate and so on … February 24, 2020. However, as expected the governor presented much of what the Monetary Policy Committee … The Reserve Bank of Zimbabwe must, therefore, seize this opportunity to use all the monetary levers at its disposal to fine tune the economy and prepare it for sustained recovery. To summarise the legal issues covered in this Bill Watch: All these issues suggest that while the government and the Reserve Bank may have expended a great deal of time and thought in constructing the new monetary policy, perhaps they should have paid more attention to the policy’s legal aspects. HARARE - As the dust swirls around Zimbabwe’s sudden shift in monetary policy, the real impact of the policy measures to the economy has started to emerge, with the stock exchange falling, exchange rates plummeting and shops shifting prices to the Zimbabwe dollar. The IMF had initially predicted a 4.2% economic growth in October 2018, but on the flipside the … zimbabwe’s monetary policy regime and the cash crisis Executive Summary The cash crisis in Zimbabwe is a symptom of a multifaceted economic problem that is rooted in the entire macro economy from production, investment, all the way to consumption. Fiscal and Monetary Policy are like Siamese twins -one cannot exist without the other. Once they have been registered under the Order, they must get an annual licence for each office from which they conduct business. Even though the Reserve Bank’s directive repeats the Governor’s statement about the compulsory use of RTGS dollars, the directive is not a generally binding law. This is theoretical and not empirically tested in Zimbabwe. The RBZ said measures will be put in place to reduce inflation to 50% by December 2020. All monetary policy would be created and implemented by the United States, some thousands of miles away from Zimbabwe. The argument by the RBZ is what we call a ” fallacy of composition”. Zimbabwe’s 2019 monetary policy statement was titled “Establishment of an Inter-bank foreign exchange market to restore competitiveness” Zimbabwe’s monetary policy measures include the establishment of inter-bank foreign exchange market, putting in place local nostro foreign currency accounts settlement platform, implementing a monetary targeting framework and ensuring the stability and resilience of the financial system through a macro-prudential framework, among others. 5 of 2009] and that declaration has not been revoked. Yet the RBZ statement never mentioned the issue of reserves. This Act is clearly a case of Parliament delegating its primary law-making power in contravention of section 134 of the Constitution, and no attempt is made to limit the power or to specify the principles and standards applicable to the regulations. The Reserve Bank of Zimbabwe raised interest rates to 35% at its June monetary policy meeting with the stated intention to “curb speculative borrowing”, though inflation is also surging. Unsustainable fiscal deficits and public debt levels created the spectre of fiscal dominance in many countries, leading to high and volatile inflation and elevated risk premia on government debt. Many other Garages have followed suite. This is far from reality. ... establishing an inter-bank foreign exchange market in Zimbabwe … But even if the two instruments were legally valid, it is doubtful if they succeed in implementing the Governor’s monetary policy in at least four respects: 1. In short, the President can make regulations under the Act controlling virtually the entire economy of Zimbabwe. Net portfolio investment dropped from usd 57.7 million in 2018 to usd 3.7 million in 2019. This Monetary Policy Statement is issued in terms of Section 46 of the Reserve Bank of Zimbabwe Act [Chapter 22:15] which requires the Bank to issue a statement containing an evaluation of the monetary policy of the last preceding six months and a description of the policy measures to be followed by the Bank during the next The Zimbabwe dollar is, for instance, still stronger than the Indian rupee, a currency for the world’s seventh largest (US$2,7 trillion) economy. According to the RBZ statement the banking system handled transactions in mono currency worth ZWL $ 459 billion hence this shows that the country is de-dollarizing. Fiscal constraints on monetary policy For much of the past three decades, fiscal policy remained a major concern for monetary policy in EMEs. The final monetary policy decision is based on the forecasts that have incorporated the MPC’s judgement. A single US dollar is equivalent to about 74,1 Indian rupees at the going rate. Prices are increasing by leaps and bounds and Zimbabwe risks re-entering the Gueness Book as the country with the highest hyperinflation. Multi-tier pricing is and remains perfectly legal. Is the Appointment of VP Chiwenga as Zimbabwe’s Health... South Africa Introduces Wildlife Zones to Save Rhino. Twenty per cent of all new foreign currency taken by Zimbabwean businesses from local customers must now be liquidated at the official exchange rate, when deposited in a domestic foreign currency bank account, as part of the measures introduced by the Reserve Bank of Zimbabwe (RBZ) in the latest monetary policy statement. It is evident that the Zimbabwean economy has self-dollarized. There is currently no legal way to make everyone in Zimbabwe use the new RTGS dollars for all purposes. The Governor of the Reserve Bank of Zimbabwe delivered his Monetary Policy Statement on the 20th February and, amongst other measures, announced the following: Dollar balances held in local FCA bank accounts and mobile payment platforms, as well as bond notes and coins, would no longer be regarded as equal in value to United States dollars. Government is out of touch with reality. Accordingly, the Bank shall vigorously pursue its primary objective of maintaining price and financial stability, while complementing fiscal policy in line with the country’s objective of becoming an upper middle income country by 2030. Currently the Banks says month-on -month inflation was 5% as at end of January. The mono currency is a weak currency which is not a store of value. The government and the Reserve Bank should remember that statutory instruments do not simply vanish when policies change: they remain in force until they are repealed, and if they are inconsistent with the new policies they may operate to subvert them. Zimbabwe faces critical shortages of medicines, food, fuel and electricity. Paragraph 9.3 of the directive reads: “In order to, therefore, align the existing operational Bureau de Change licences to the Monetary Policy announcement, all current Bureau de Change licences registered under Tier 3 of the Authorised Dealers with Limited Authority have been cancelled to allow re-registration and issuance of new licences in line with the new Bureau de Change Guidelines.”. The cancellation of any registration or licence is a serious matter and can only be done if the registered person or licensee consents, or if a law permits the cancellation. SI 33 of 2019 (made under the Presidential Powers Act) adds a new section 44C to the Reserve Bank of Zimbabwe Act under which the Minister of Finance can authorise the Reserve Bank to issue electronic currency and specify its exchange rate with any other currency. As the RBZ statement reveals, in 2019 Foreign Direct Investment (FDI) dropped from usd 717 million in 2018 to usd 250 million in 2019. The much awaited monetary policy statement presentation has come and gone in a few minutes. Mid-Term Monetary Policy Statement - 21 August 2020 Download Statement - 21 August 2020 | .pdf [990 KB] CONTACT US. Zimbabwe has brought back its own currency, the Zimbabwe dollar, just over a decade after its usefulness was destroyed by hyperinflation. The review of capital requirements will ensure that financial institutions will have enough capital to backup deposits. Globalization and Monetary Policy Institute 2011 Annual Report • Federal reserve Bank oF dallas 3 the African continent and is bounded to the north by Zambia, to the east by Mozambique, to the south by South Africa and to the west by Botswana and the Caprivi Strip of Namibia. So if a debtor owes a creditor $20, say, the debtor can normally repay the debt by offering $20 in RTGS dollars (because they are legal tender). If the Acts are unconstitutional then they and the instruments are void, and the monetary policy remains just a policy with no legislation to back it up. THE Monetary Policy Statement presented by Reserve Bank of Zimbabwe governor John Mangudya this week is a damp squib which fails to substantively address the prevailing crisis and is far removed from the reality on the ground. Inflation drivers in Zimbabwe are real not viscaral. The RBZ thinks inflation is being driven by the public’s expectations of future inflation based on their past experiences. The Governor simply mentioned that the Bank will import additional bank notes and coins to raise the portion of physical cash to 10% of total deposits. At 390,757 square kilometers (150,871 square miles), Zimbabwe is Neither statutory instrument goes further to say that RTGS dollars must be used for pricing, recording debts, accounting and settlement of transactions. Inflationary expectations operate under perfect markets and assumes that all individuals and economic agents are rational and that there is no information assymetry. A further point is that in 2009 British pounds, Euros, U.S. The airline industry has never de-dollarized from the beginning. The real impact of Zim’s shift in monetary policy emerge HARARE - As the dust swirls around Zimbabwe’s sudden shift in monetary policy, the real impact of the policy measures to the economy has started to emerge, with the stock exchange falling, exchange rates plummeting and shops shifting prices to the Zimbabwe dollar. The IMF says Zimbabwe will register a negative economic growth of -5.2% in 2019, that means Zimbabwe is officially in a recession, for the first time since 2008. Whether incentive schemes like those mentioned in the directive can be cancelled without notice depends mainly on whether they amount to contracts between the government and the persons to whom the incentives are offered. Bureaux de change may have consented to the cancellation of their registration, and if they have done so freely and with full knowledge of their rights there is no problem. For example in the Property Sector, rentals and Sales are in usd. Although this directive seems to have circulated on social media it has not been published in the Gazette nor has it been served on all traders, accountants and other people who are presumably expected to abide by it. Local dollar electronic balances and bond notes and coins would become “RTGS dollars”, part of Zimbabwe’s multi-currency system and trading at an exchange rate fixed by market forces. Instead we shall comment on some legal issues which do not seem to have received much attention. James Rusike, Office Driver James Rusike is the driver in the IMF… The Reserve Bank of Zimbabwe Governor Dr. John Mangudya presented an optimistic 2018 Monetary Policy Statement on 8 February 2018 which complements the largely austerity driven New Economic Order Budget Statement presented by Finance and Economic Development Minister Patrick Chinamasa on the 7th of December 2017. The SI goes on to state that the Minister is deemed to have authorised the Reserve Bank to issue RTGS dollars which are “lawful tender”, and to have specified that existing electronic balances in bank accounts (other than Nostro accounts) are deemed to be in the new RTGS dollars. 2) Act, 2009, No. The parallel market is driving prices upwards and stoking hyperinflation. This figure will certainly increase public debt. The Zimbabwean financial situation, its industry, its businesses, … If he meant that market forces would compel sellers to stop pricing in foreign currency because everyone is using RTGS dollars, then he may be right – though prices are still being fixed in US dollars so he may in fact be wrong. Zimbabwe’s hyperinflation episode brings to the fore the importance of ensuring that the Central Bank is independent in executing its mandate of influencing the In his monetary policy statement the Governor said: “The use of RTGS dollars for domestic transactions will eliminate the existence of the multi-pricing system and charging of goods and services in foreign currency within the domestic economy.”. WHAT NEW MONETARY POLICY STATEMENT MEANS TO AVERAGE ZIMBABWEAN Prof Mthuli Ncube Path to Prosperity As we work to put Zimbabwe’s economy back on its feet, recovery is the word. This is a dangerous situation which can lead to the capture of the RBZ and the whole financial sector. That is important because the fact that a currency is legal tender does not mean that it must be used for all purposes. To give effect to the Governor’s monetary policy statement, the Reserve Bank’s directive announced the cancellation of all existing bureaux de change licences. In other words, under this Act, the President has the same law-making power as Parliament. — Picture by Memory Mangombe The majority of transactions in Zimbabwe are in the form of what i can call covert re-dollarization. I have addressed the gaps and shortcomings of the RBZ Monetary Policy Statement, now i turn to the Myths. The reserves at the RBZ are less than 2 weeks of import cover. Public Expectation Number 2: Bringing Back the United States Dollar. RBZ Governor Dr Mangudya presents mid-term Monetary Policy. At the moment there is legislative confusion. Box 1283 Harare Zimbabwe Telephone +263 242 703 000, +263 867 700 0477 Toll Free Numbers 0800 6009 - Telone landlines only 0808 6770 - Econet lines only E-mails Yet the devil is in the details. 2. 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