The Reserve Bank of Zimbabwe has come out guns blazing following the release of a paper by the country’s leading organisation representing industry, The Confederation of Zimbabwe Industries. But what had the CZI said? Here is the paper in full and the RBZ response.
22 APRIL 2022
URGENT ENGAGEMENT PAPER ON THE DETERIORATING CURRENCY SITUATION
CZI is committed to working with the Government to resolve the economic ills afflicting the nation such as inflation and economic instability.
In the past 12 months, the government has made significant progress toward managing inflation and bringing price stability from the peak period of July 2020 when annual inflation reached 838%.
The government has also made commendable progress in infrastructure investment in the last 12 months with notable funding for dam construction and road infrastructure standing out.
However, inflationary pressures and currency instability have persisted to the detriment of economic progress.
Over the years CZI’s advice has been premised on the economic principle that there is no known example in economic history that has been able to simultaneously control
- Money Supply
- Interest Rates
- Exchange Rates
Getting the price of foreign currency right is a fundamental matter of Zimbabwe’s economic development interest.
- An overvalued ZWL broadly undermines the scope for maximizing structural efficiency and the growth of both the export industry and import substitution.
- The policy of maintaining an overvalued ZWL imposes a big tax on the export industry undermining its growth and transparency.
- The policy also unwittingly subsidises imported industrial goods that then start competing unfairly for supermarket space with locally manufactured goods and accelerates deindustrialization.
Continued next page