Move on bank notes laudable
THE Reserve Bank of Zimbabwe (RBZ) decision not to issue bank notes higher than $50 despite pressure from the transacting public is commendable.
While it does not make sense on paper for a country’s highest note to be unable to buy a loaf of bread, there are a host of other issues that need to be addressed in the background before that.
The apex bank had to issue a public statement to deny media reports that it intended to release $100 and $200 bank notes onto the market. While inflation is driven by a number of factors, such high denomination notes would surely add inflationary pressures to the market.
Mangudya’s decision is expected to protect the budding confidence in the strengthening local currency, basic commodities price stability and confidence in the financial services sector.
Consistent with the National Development Strategy (NDS), which seeks to reduce inflation figures to within the Sadc inflation target range of three to seven percent by 2025, the central bank looks eager to play its part.
As the local currency continues to stabilise on the back of strict exchange control from monetary authorities, there is a need to resist irresponsible, yet seemingly right moves, which may upset the current positive tone in the market.
Riding on the upbeat tone, there is a need to ensure that authorities rein in public utilities fees, licence fees and other tariffs to control government inflation that in turn feeds the inflationary pressures on the market. Apart from that, there is need to continue fine tuning exchange controls, stimulus packages to industry to ramp up local production as well as extending concessionary loans to industry, the mining and agricultural sectors.
Insofar as the central bank remains committed to safeguarding the positive gains in the financial service sector, the monetary authorities’ efforts are worth noting.
As alluded earlier, prudent monetary policies alone are not enough to tame inflationary pressures that confronts the economy. Now that positive gains in the economy have become more tangible, it is more urgent than ever that other fiscal measures be implemented to douse the inflationary pressures.
Fiscal measures on containing expenditures in government combined with disciplinary measures in the financial sector to contain inflation need to be implemented as a matter of urgency.
Financial discipline in government spending, policy consistency as well as tackling corruption remain priorities that authorities have to target as key deliverables.