EDITORIAL COMMENT: Mid-Term policy strengthens banking

Dr Mangudya

Dr Mangudya

Reserve Bank of Zimbabwe Governor Dr John Mangudya should be commended for coming up with measures to achieve sustainable economic growth anchored on the multi-currency system.

In his Mid-Term Monetary Policy Statement released yesterday, Dr Mangudya outlined a cocktail of measures and initiatives being undertaken by the central bank.

These include policy measures to promote production across key sectors of the economy and especially growing exports as a major source of liquidity and banking sector stability.

The policy measures in the Mid-Term Policy Statement build on previous policy initiatives and the positive effect of these policies have helped to strengthen the stability of the banking sector, thereby putting the economy on a sustained path to recovery.

Some of the policies that the RBZ has put in place include the introduction of the interbank support facility which has lender of last resort characteristics to deal with temporary liquidity requirements of banks.

The facility, supported by the African Export-Import Bank under the Afreximbank Trade Debt Backed Securities initiative has gone a long way to calm the banking sector by ensuring that normal day to day fluctuations in the banking system can be handled automatically. This is in fact one of the main roles of any central bank. Other interventions included the establishment of the Zimbabwe Asset Management Corporation to deal with bad loans, introduction of the credit reference system and amendments to the Banking Act to mitigate against future occurrences of indiscipline by both borrowers and banks.

The introduction of bond coins has to some extent addressed price competitiveness through small denomination coins. The ongoing demonetisation of the Zimbabwe dollar is expected to send correct signal and provide the necessary confidence to investors and development partners. This together with the policy measures announced in yesterday’s Mid-Term Monetary Policy Statement and those announced by the Minister of Finance and Economic Development minister Patrick Chinamasa in his fiscal policy should drive the agenda to go beyond stability by focusing on enhancing production and productivity for a sustainable solution to the challenges besetting the economy.

It is against this background that the theme for Dr Mangudya’s Mid-Term Monetary Policy Statement is “Beyond Stabilisation” because “the economy is hungry for development.”

The central bank governor made it clear that the economy needs to be fed by production and productivity, achieving a growth target of at least 5 percent per annum. Going beyond stabilisation, Dr Mangudya should be applauded for noting that the economy requires a serious paradigm shift to fully exploit abundant natural resources.

We concur with his assertions that key success factors needed to go beyond stabilisation include dedication, determination, discipline and sincerity to ensure that policies that are not supportive of production and productivity are minimised or not tolerated.

To achieve the intended objectives of economic turnaround and sustainable growth, all stakeholders need to work hand in glove in implementing national policies while measures should be put in place to further open up the economy for investments.

Measures to improve the business climate in Zimbabwe for continued growth of the economy are already beginning to bear fruit as is evidenced by the country’s improved rating on the World Economic Forum’s 2014 Global Competitiveness report.

This should embolden every patriotic Zimbabwean to give their all to ensure that the vision for a peaceful and prosperous Zimbabwe with a vibrant economy is achieved.

Zimbabwe has already gone through the worst period of its economic turmoil, the decade to 2008, which was characterised by hyperinflation and widespread company closures and is certainly in much better stead to negotiate past current challenges.

Achieving Zim-Asset target of 7,1 percent average economic growth, in the wake of serious liquidity challenges, will require Government and other stakeholders to work together monitoring progress and making interventions when the need arises.

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