- Dr THOMAS COWAN HYPOTHESISES THAT THE CORONA VIRUS may be history repeating itself and caused by 5G at the Health And Human Rights Summit in Tucson, Arizona.
- BULAWAYO POLICE ARREST HUNDREDS of people who were queuing at TM Hyper to buy maize meal, a few hours after the police issued an order instructing people to vacate the CBD and follow the Lockdown regulations that seek to effect social distancing.
- JUDGEMENT that Chamisa is not the legitimate leader of the MDC -T, reinforces Khupe's claim to MDC constitutional leadership and control of MDC finances, assets including, buildings, furniture, vehicles and documents, literally all MDC material as the acting president of the MDC at law.
- MDC ALLIANCE VP Welshman Ncube agrees with the judges yesterday that Chamisa is not the legitimate leader of the MDC -T.
- MDC Alliance VP Ncube confronted Komichi and Mwonzora on "the Zanu-PF" strategy to destroy the main opposition through the courts.
Presenting his Mid-Term Monetary Policy Statement yesterday, RBZ Governor, Dr John Mangudya, said the bond notes strategy would impact positively on the economy as he appealed for Zimbabweans to have trust and confidence in the merits of the approach.
He said the adoption of bond notes came in the context of incentivising production, a long term strategy for economic growth frame-worked along an export incentive scheme of up to five percent to promote export of goods and services.
“At the rate at which the country is exporting and based on statistics …we anticipate that bond notes equivalent to around $75 million will be in the market by the end of December 2016.
“The bond notes which will start to circulate by end of October 2016 will be at par with the US$ (that is; one to one) and will be used and treated in the same manner as bond coins,” said Dr Mangudya.
“In simple terms exporters will receive the incentive proceeds in US$ and the incentive will be credited to their US$ accounts in US$ currency. An exporter will then transact through RTGS, makes foreign payments for imports of goods and services and transact freely within the multi-currency exchange system. It is also important to note that bond notes shall not be forced on people who do not like them.”
The central bank chief said the multi-currency foreign exchange system “is here to stay” as he allayed fears over the return of the Zimbabwean dollar. He added that the sustainability of the multi-currency system was dependent on the economy’s capacity and ability to generate foreign exchange to meet its domestic and foreign requirements, development and promotion of foreign exchange revenue streams such as exports of goods and services and diaspora remittances.
Dr Mangudya expressed concern over the country’s trade deficit — estimated to be around $2.5 billion per annum — which he said requires a substantial policy shift to promote exports in view of lack of competitiveness of Zimbabwean exports.
He said this reality gave the Government impetus, through the apex bank, to introduce the performance related export bonus scheme of up to five percent to exporters.
“The funding mechanism of the export incentive scheme will be through bond notes in order to preserve the offshore $200 million counter-cyclical facility that has been arranged to support the export bonus scheme from externalisation and/or capital flight, which has continued to negatively affect the economy since dollarisation in 2009. The bond notes will be zero-coupon, tax-exempt debt instruments,” he explained.
The Governor said the issuance of bond notes has a self-control mechanism in that when there are no exports there will be no bond notes. He said the bond notes will be gradually released into the economy “in sympathy with export receipts through normal banking channels up to a maximum ceiling of the facility of $200 million.”
The ceiling would be attained when total exports are around US$6 billion, he said.
He acknowledged public concerns and anxiety over bond notes, which he said was emanating from the general lack of trust and confidence within the economy.
“The bank is addressing the concerns by planning to introduce smaller denominations of bond notes of $2 and $5. In addition the bank has proposed for the setting up of an independent board to have an oversight role on the issuance of bond notes in the economy,” said Dr Mangudya.
He insisted that the coming in of bond notes does not mark the return of the Zimbabwe dollar through the back door and that macro-economic fundamentals or conditions for the return of the local currency are not yet right to do so.
Dr Mangudya said the economic situation in Zimbabwe requires the nation to do things differently and “walk the talk” to transform the economy by changing the narrative from consumption to production.
He said the economy was hungry for production and productivity adding that the more than 90 percent public sector wage and salary bill was not sustainable as it undermined the economy’s capacity to enhance employment and to be competitive.
“Walking the Talk within the above context of weak economic conditions requires policy precision and urgent implementation of necessary reform measures to transform the economy. The process won’t be easy but must be done. It requires national sacrifice, sincerity and integrity. It requires the ability to share the adjustment or transformation burden across the board and between the fiscal and monetary policies,” said the Governor.
He announced a string of policy measures meant to complement confidence and production. These include: ease of securing offshore loans, incentivising inflows from the Diaspora and private unrequited transfers, a $215 million Nostro stabilisation facility, $20 million gold development initiative for small scale gold producers, $10 million horticulture/floriculture pre- and post-shipment facility, resuscitation of the credit guarantee scheme, establishment of an offshore financial centre and guidance on interest rates charged by microfinance institutions.
Dr Mangudya reported that the banking sector average prudential liquidity ratio, at 52.47 percent as at 30 June 2016, was above the regulatory minimum requirement of 30 percent. Total banking sector deposits jumped by 5.2 percent to $5.9 billion as at 30 June 2016 from $5.6 billion as at 31 December 2015.
However, banking loans and advances dropped from $4 billion to $3.7 billion as at 30 June 2016, a trend attributed to cautious and prudent lending measures by banking institutions.
To stabilise and stimulate the economy, Dr Mangudya said the RBZ was engaging the banking sector to reduce lending interest rates to a maximum of 15 percent agreed in May 2016.
“To that end, I am pleased to report that most banking institutions have heeded the call resulting in a continued decline in lending rates. However, there some banks which are still lending at rates above the 15 percent agreed threshold. These banks are urged to reduce their lending rates to levels below the threshold,” he said.
Dr Mangudya projected that inflation would remain broadly subdued in 2016 with the persistent weakening of the South African Rand against major currencies and low aggregate demand continuing to exert downward pressure on domestic prices.
Dr Mangudya stressed the need for financial inclusion in line with the National Financial Inclusion Strategy, which was launched on 11 March 2016. He said a number of policy measures taken since May 2016 had started yielding positive results on the economy.
These include promotion of cashless payment systems that include the use of plastic money through point of sale (POS) machines, on-line banking, transfers and other electronic banking systems.
In this regard, he reported that total electronic payments have increased from $4.1 billion in January to US$5.5 billion in July. The central bank has also capped cash withdrawal amounts to $1 000 for individuals and $10 000 for corporates per day in line with international best practice.
Dr Mangudya, however, noted that queues in banking halls on paydays continue although the “cash shortage has subsided” especially in view of the surge in the use of cashless payment systems.
The Governor said gold deliveries to Fidelity Printers and Refiners as at 30 June, was 9.6 tonnes compared to 8.1 tonnes delivered during the same period in 2015, representing an increase of 18 percent.
“Enhanced production will increase employment, fiscal space, exports, economic growth and reduce import dependence and poverty. This is the panacea to restore trust and confidence,” said Dr Mangudya. Prosper Ndlovu source-chronicle