BUSINESS

Mthuli Ncube’s half-hearted currency reforms bad for the economy

Mthuli Ncube’s half-hearted currency reforms bad for the economy.

The government seems to be vacillating when it comes to reintroducing a fully-fledged local currency. Captains of Industry have condemned the “half-hearted” approach to currency reforms by Finance and Economic Development Minister, Mthuli Ncube.

Bond-Notes

In June this year, the government made the real-time gross settlement (RTGS) and bonds notes as well as coins the sole legal tender through the statutory instrument (SI) 142 of 2019. The development put to an end the multi-currency regime that had been in place since 2009. Confederation of Zimbabwe Industries president, Henry Ruzvidzo, asserted that monetary authorities should actively support the market. He said:

Prospects for the industry to year-end will depend on a number of important factors, which include foreign currency availability, electricity supply and general macro-economic stability.

The macro-environment has been highly volatile for most of the year and does not auger well for business performance. A functional market for foreign currency requires liquidity and transparency. The continued half-hearted approach to the mono-currency system is undermining confidence in the local currency.

The active support of the market by the monetary authorities is also important for stability. Meanwhile, Ncube revealed that Zimbabwe is moving towards having its fiat currency later this year. Writing in the Financial Times recently, Ncube said:

The Zimbabwe dollar, comprising RTGS and bond notes, is now the designated sole legal tender in Zimbabwe — pending the rollout of a fiat currency later in the year.

Initially, the government introduced it alongside the other currencies, with the intention of it becoming the main currency of exchange in place of the dollar, which would primarily be used as a reserve of value.

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