Zimbabwe’s President Emmerson Mnangagwa’s Government is hovered to Establish a Currency Board Subsidizing all Units of Domestic Currency in Circulation
By Abdul Rahman Bangura–
NEW AFRICA BUSINESS NEWS (NABN) Freetown, Sierra Leone – Ashok Chakravarti, a fellow of the Reserve Bank of Zimbabwe’s Monetary Policy Committee (MPC), on Thursday told “the issue of the currency board is being looked at”.
Lecturing an economic meeting in the resort city of Victoria Falls, Chakravarti expanded that “it is being considered” to support the embattled Zimbabwean dollar.
He asserted that, Zimbabwe would prefer about $700 million to back the percentage of local capital in circulation. According to Investopedia, a currency board is an extreme configuration of a pegged exchange rate. If initiated in Zimbabwe, the currency board will take away the management of the exchange rate and the money supply from RBZ.
The banknotes authority will in expansion to a restricted exchange rate, retain reserves of the basic foreign currency to back all units of domestic currency in circulation.
Steve Hanke – Renowned American Economist on Friday August, 5th 2022 asserted Zimbabwe’s inflation had risen to 487%/yr. He was nonetheless, optimistic that the condition could be unraveled if the nation carried out the currency board.
“In the face of surging inflation, Zimbabwe is finally considering the establishment of a currency board—14 years after I first proposed one. Today, I accurately measure inflation at 487%/yr- nearly 2.5x the official rate. A properly designed currency board would smash inflation,” he told.
Tinashe Murapata – local Economist similarly greeted proposals for the currency board.
“It’s good news that the authorities are thinking about a currency board. Perhaps now the debate can become more technical. And discuss the how.
“A currency board is the only solution to the currency crisis. But it’s important to adhere to the spirit and letter, not just the idea,” Murapata explained.
In a bid to save the embattled Zimbabwean dollar, the government on August 11th 2022 suspended payment for goods priced in black-market rates.
Ministry of Finance Permanent Secretary George Guvamatanga declared openly that, all payments had been postponed for goods supplied to Government ministries, Departments, and Agencies and probably priced using black market exchange rates with retrieving units now compelled to do due assiduousness on agreements and
confirm that the official interbank rate is being used before payments synopsis.
“Such pricing framework by the suppliers of goods and services, have not only been causing inflationary pressures but also parallel market activities,” Guvamatanga let out in the circular seen by Bloomberg and dated August 4th, 2022. The Treasury confirmed the letter.
“This has resultantly caused instability in the foreign exchange market characterized by unnecessary movements on the rate resulting in exorbitant prices being charged,” he announced.