Cross, a former policy advisor of the opposition Movement for Democratic Change who now seems to have turned into a policy advisor for the ruling Zimbabwe African National Union-Patriotic Front, says President Emmerson Mnangagwa’s administration has the right intentions but it must free the exchange rate now.
He says that by introducing exchange controls, the Reserve Bank of Zimbabwe has created a system to sweep US$3 billion into Nostro accounts.
“If we were to announce that with immediate effect all retentions of export earnings by the Reserve Bank are suspended and exporters should retain 100 per cent of their sales in their own FCA accounts, the result would be to release US$3 billion into the open market for hard currency,” he writes on his personal blog.
“My own view is that total hard currency inflows to Zimbabwe from all sources probably approach US$8 billion at this time (Exports, Tourism, Transfers, Remittances etc.). However, the retention of earnings by the export sector and others affected by exchange control sweeping activities would immediately reduce open market rates for the RTGS dollar.
“Most business persons say they think it could go to 2 to 1 or slightly more – but the consensus is that it would strengthen rather than depreciate.”
The market exchange rate is currently at 3.5 to 1 but the central bank insists the US dollar and the bond note are at par.
Finance Minister Mthuli Ncube initially wanted to abolish the bond note by the end of this month but he later changed his mind to “preserve” the value of people’s savings and incomes.
The administration has, however, failed to control prices which rocketed in line with the parallel market exchange rate.
The government has vowed not to impose price controls as this could be disastrous but is instead banking on moral suasion.
There have been calls to allow some service stations to sell fuel in US dollars to solve the problem of queues.
Reports say some people, including Mnangagwa’s lieutenants, are cashing in on the fuel crisis and are resisting any measures to stabilise the sector.
Below is Cross’s write-up
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