By Rungano Dzikira
The Reserve Bank of Zimbabwe (RBZ) has set its target on achieving its proposed five year de-dollarisation programme saying that it was achievable once the economy stabilises its exchange rate and contain inflation.
Addressing delegates at the State of the Economy Report, in the capital, the central bank Governor, Dr John Mangudya said that the economy was on its recovery path and the central bank’s key focus for now was to reduce inflation and stabilise the exchange rate.
“We want an inflation pattern which is stable. RBZ projects month on month inflation to end the first quarter of 2020 in a single digit and end period annual inflation at 50%,” he said.
“As RBZ and Government, we are coming up with a de-dollarisation framework which will be over in five years, and the de-dollarisation journey has just started,” he said.
Adding on, Dr Mangudya said that the Zimbabwean economy was no different from other economies which were merely on different levels of dollarization.
“Most countries in the world have a level of dollarization; Liberia is at 70%, Zambia 45%, Zimbabwe is at 32%, Uganda at 32%, Tanzania 30 %, Mozambique 28%, Botswana 15 % and Kenya 13%.
“The argument is how can we then motivate people to utilise local currency, not saying how we throw away the USD. We acknowledge that the 2002-2008 experience has conditioned people to be what we are today,” he said.
Among other raft of measures introduced to achieve this, Government has since introduced the Reuters system this week as a way of stabilising the exchange rate.
“Way forward to stabilise prices and exchange rate include a sound fiscal position to limit monetisation of fiscal deficit, commitment to monetary targeting framework to contain money supply growth, issuing attractive money market instruments to enhance the store of value function of the local currency, promoting the use of free funds through formal means to make sure that we use that USD 1 billion which comes through remittances,” said Dr Mangudya.
He also added that the potential of the country’s economy was pegged at 4-5% growth per annum, figures which could still be surpassed with increased production.
Economists present, however, bemoaned policy inconsistency in the foreign exchange market as the major reason for rent-seeking behaviour across various economic agents, which it advised Government to work on.
