Reserve Bank Governor John Mangudya announced the monetary policy statement for 2020. In sharp contrast to last years much anticipated and delayed monetary policy for the same period, nobody was waiting for this one. Of course, last years brought with it the return of the Zimbabwean dollar, as the RTGS dollar at the time. Unsurprisingly the monetary policy statement offered little more than a glimpse into the minds of the people in charge of our money.The highlight of the show was definitely Mangidya saying the nation is successfully de-dollarising. By his reckoning, it is natural to have some levels of dollarisation as we do away with the old ways of doing things. Perhaps the good governor should spend less time in the tower in regards to the dollarisation position. As many industries look for ways to get back to the stable US dollar. None the less he believes that we will successfully de-dollarise in 5 years.
Most measures in place remained unchanged including the bank lending rate which remains at 35%. Mangudya made an interesting note of the fact that the majority of bank deposits in the country are held by a few large companies, more than 50%. In light of this the government plans to offer bonds specially designed for corporates that would unlock liquidity. Essentially offering them debt instruments which they can sell, release the money they are believed to be sitting on.
The deposits and foreign currency situations in the country were also highlighted 32% of all deposits in the nation are held in foreign currencies. Foreign currency inflows were down on the year 2018 by 4.4%. Diaspora remittances were actually up on the 2018 level by 2.6%, while NGO remittances were down. Export proceeds recorded the sharpest decline of 11%.
What caught my though was the mention of the cash situation and all efforts to alleviate the plight of citizens. Current money supply in the economy is at ZW$35 billion while cash in circulation is now ZW$1.1 billion, representing 3.5% cash levels. Now if you have a memory like mine you’ll recall that when the drip-feeding of cash into the system was announced, the targeted cash level was ZW$1.5 billion which when added to the existing 400 million cash in circulation at the time would constitute 10% of the money supply, then at ZW$15 billion. In previous articles we noted how the cash injections were not making much difference on the streets and this overwhelming evidence why, the money supply continues to grow, almost tripled since December based on information we have. On that note, the governor played the same tune the Finance Minister has been playing, saying we will receive higher denomination notes this year.
Overall the monetary policy can best be described as a damp squib. Bearing in mind that the same statement last year ripped apart the livelihoods of the nation we will gladly accept the damp squib and its half-hearted attempts at addressing problems.