By Prof Gift Mugano| I still insist that the US$285m is a drop in the ocean.
I listened to the Governor’s response with much respect. However, I would like to argue my case as follows:

• The submission by the Governor is narrowly focusing on the view that the economy is dollarised. Yes, from a definition of point of view, the economy is dollarised. However, the fact of the matter is that the statistics we are using as indicators of dollarisation such as total deposits in the bank in USD vs ZWL and loans in USD/ZW (which is +96% in USD in terms of loans) are not a correct yardstick of the intensity of dollarisation because the informal sector is not banked – only 20% of the economy is banked. In addition, credit to private sector as a share of GDP is merely 8.8%. In essence, 96% of 8.8% of the economy is the total loans in USD which have been given out by banks. This is small share of the total currency in circulation. Hence, using USD/ZW loan ratio is somehow misleading.

-For argument sake, if the economy is +96% dollarised, why was the rate running away in recent weeks? Is the chaos in foreign exchange market caused by 4% of ZWL? The answer is a big no. Alternatively, are we saying that the national budget which runs into tens of trillions of ZWL plus private sector own budgets in ZWL on constitute 4% of total cash in circulation? No.

• I believe that there is a significant share of ZWL in circulation which may be in the region of 30% of total currency in circulation as a result of the budget factor. There is so much excessive liquidity which is being pumped into the market by Treasury through payment of contractors and civil servants. In addition, private sector also makes payments in ZWL (e.g., for salaries & services/goods)

-The recipients of the ZWL payments dump the ZWL on the black market with a view to preserve their earnings or secure the USD which is required at passports, fuel stations, ZIMRA, tuckshops, schools, etc. This trend will continue as long as ZiG is not accepted at passports office, fuel stations, ZIMRA, tuckshops, schools, etc.

• In addition, in his MPS which he presented today, the Governor emphasised that the RBZ has more than 3 times reserves to cover the reserve money supply which is ZW$2.6 trillion (equivalent to US$90 million). He was obviously trying to assure the market that there are enough reserves to meet forex demand. However, his submission is narrowly focusing on money supply as the main driver of the exchange rate volatility which is wrong. Excessive liquidity coming from the budget is the major destabilising factor of the exchange rate instability Zimbabwe.

Again, for argument sake, is our Governor by any chance insinuating that the run away exchange rate witnessed in the last few weeks is it the ZW$2.6 trillion? I would like to argue that the disbursements from the ZW$58.2 trillion budget are a big factor.

Again, the question which arises is that, is the US$285m enough to guarantee demand for forex, that is, for both import and value preservation? The answer is a big no.

• What I am sure of is that in the coming few days, the Governor will understand that beyond managing money supply, he must worry about excess liquidity from Treasury. Verily, verily, he will appreciate that I am a real economic analyst.

Let me end by asserting that if the budget is in USD, my view that we need at least 6 months on import cover would be invalid. In view of the fact that the budget is in ZWL, we need at least US$4.5 billion in reserves so that anyone who walks in the bank can change money the same way we do in the black market. Crazy as it may look like, it is the only way to kill the black market and restore confidence. Liberalising the exchange rate without allowing people & anyone who want USD to access it from the formal banks, will not guarantee the success of ZiG. In addition, ZiG must be exclusively used at passports office, fuel stations, ZIMRA, tuckshops, schools, etc.

It is my prayer that the Governor will have an open door policy like his predecessor @DrJPMangudya so that we continue the dialogue.

Ndaedza kutaura semunhu mukuru kuti tivake nyika yedu. Nyaya yemari chokwadi yanesa. Tave kufanirwa kuikunda hondo yekuti mari ive nesimba. Hatingaiti mari inochinja chinja kakawanda gore risati rapera hazviendesi nyika mberi kana kukurudzira vaya vanoda kuita ma investments muno. Saka ngative nemweya wakanaka wekuonesana murugare.

Ndatoona Governor vakutotanga nekuda kubatwa nemweya we social media kuda kutinyomba haiwa hazvinzwarwo ivo ndiGovernor hofisi yavo haubvumiri izvozvo ngavasashoropodza maprofession edu asi vatambe nenyaya iri mudariro chete. Pamwe chokwadi vanogona kunga vari right pakuti mari iri mudura rayo inokwana. Hazvina kuipa vanongotiudza murungare ndokuti nyika ivakike. Hakuna muziva zvose.

Isu mapurofesa chedu kubvonga chete anodyawo wadya kushata kana nhapitapi vachadudzira ivoooo sekuimba kwakaita Baba Shero @alickmacheso3. Kunyangwe hedu tichifanirwa kuudzana murugare, hofisi yedu yakati sunungukei kuti titambanuke (flexibility) pakutaura kwedu kupfuura Governor wedu.