How will we ensure that lending rates remain real, in other words they remain above inflation rate all the time so that they do not end up exacerbating the inflationary pressures. We will make sure that when this happens, the correct way to run a monetary policy is always to ensure that we have a positive real interest rate. The interest rate must always remain above the inflation rate. We will ensure that this is the case. In addition to that, we will apply the design of the structured currency which is that we cannot increase domestic liquidity before increasing the reserves in the first place. That must also be applied in addition to the interest rate policy that Hon. Mutodi refers to.
I now turn to Hon. Chiduwa in terms of the complementary fiscal measures – what measures shall we announce to complement the Monetary Policy Statement. We have a few, but I should not announce them here in Parliament. I will just give an indication. What we have announced for sure is that 50% of the company taxes, corporate taxes will be in ZiG to increase the demand for our currency. We will be very specific when we make the announcement as to which fees and which taxes will be paid in ZiG beyond the request that corporates pay in domestic currency. We will make an announcement in the fullness of time. I will beg for his indulgence on this one and not to make it in Parliament today but we already have an idea.
Coming to another question and a very important one, what we will do with the counters on the Stock Exchange that were suspended because under the Zimbabwe dollar scenario, their prices were contributing to the parallel market activities. This is how we determine things to be and we felt that this ought to be suspended from the market because that fungibility was really creating challenges in terms of managing the exchange rate system. So, we suspended that and also took away the fungibility characteristics of the stocks. I am happy to say that the issue is under review as I speak and we are making announcements soon on this matter. I do not want to commit specific action but this is under review.
It is an issue because pensioners want to be able to put some value to their pensions from those specific stocks and some of the pensions, these are large holdings and the pensioners are saying look, we need to put some value. The book value that we last entered into the books was when the stocks were publicly trading but since then we have had an opportunity to make any adjustments. So, it is affecting the value of these pensions, but also affecting value of liquidity of the pensions. So, we are reviewing this.
I now turn to Hon. Matewu who asked about – what does the US$90 million include and secondly, is there adequate cover in a way? The US$90 million really is the reserve money in circulation which is M-zero. Perhaps if you are referring to issues such as the NMCDs, those are not immediately available because we have quarantined these using long term dated Instrument design where the NMCD would be available in a year’s time but in the interim, we will pay an interest to the bank. We have quarantined it that way. We have also quarantined the backlogs from the auction as well through a similar mechanism where we are issuing long dated Instruments. That money is not available immediately. It does not mess up the liquidity projection and the design of the currency. We believe that we have enough cover of this US$90 million without difficulty at all.
You also heard Treasury announcing that in addition to what the RBZ is declaring as reserves of US$285 million, we have an additional US$300 in Treasury which we stand ready to assist the Central Bank if there is a shock to the system.
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