Reserve Bank of Zimbabwe governor Dr John Mangudya is expected to deliver a largely developmental Monetary Policy Statement today which will complement the Mid-Term Fiscal Policy Review Statement presented by Finance and Economic Development Minister Patrick Chinamasa last week.Dr Mangudya’s policy comes just after Government shot down proposals by Minister Chiamasa to reduce the civil service wage bill through a staff rationalisation, bonus suspension and pay and allowances cut.
Economic analysts say that to complement the Mid-Term Fiscal review, Dr Mangudya will need to speak to supply side interventions in order to buttress his famous narrative of production. This will be over and above the 5 percent export incentive scheme introduced in May to boost exports and ensure a sustainable flow of foreign currency.
Given that Cabinet shot down proposals by Minister Chinamasa to reduce the civil service wage bill, Dr Mangudya will need to announce how the central bank will raise funding for Government to boost and sustain its operations. Already, a $150 million stabilisation facility with a regional financier has been negotiated for.
Government has been operating a budget deficit with the position expected to widen to $1 billion by year end from $623,2 million in the six months to June. To finance the deficit, Government has turned to the RBZ to issue Treasury Bills with around $726,1 million having been issued by the end of June. The central bank is yet to officially issue a statement on the amount of TBs that are in the market but estimates put the amount around $2 billion.
Analysts expect Dr Mangudya to give an assurance that the rising Government debt will not completely shut out private sector credit and to address the instability factor of TBs given that most of them are now of a long tenure.
The governor is also expected to address issues around the delays in external payments, progress made to support the multi-currency system particularly the use of the rand, the progress on arrears clearance, interest rates, financial inclusion and to give an update on the introduction of bond notes.
Bond notes will be introduced through a $200 million export incentive facility and will go a long way in preserving the use of the multi currency system.