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Odds against new RBZ boss

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LIVINGSTONE MARUFU AND CLOUDINE MATOLA

 

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Challenges  confronting  the country’s precarious economy  will  present the greatest  test  of newly appointed central bank governor, Dr John Mushayavanhu’s professional life with the new Reserve Bank of Zimbabwe chief already reportedly ‘camped’ at his new offices  as he prepares to officially take charge of probably the most challenging role in the country.

Odds are seemingly against Dr Mushayavanhu, former Chief Executive Officer of First Banking Corporation (FBC) who was appointed to replace Dr John Mangudya who takes up a new role with  multiple analysts arguing the  current  operating  environment was unfavourable for Dr Mushayavanhu.

Zimbabwe’s fragile economy also has to contend with power shortages, skyrocketing inflation, unstable exchange rates and a faster depreciation of the Zimbabwe dollar in  relative to all other major currencies.

His new role comes at a time the Zimbabwe dollar has depreciated on the parallel market to ZWL$40 000: US$1 from ZWL$25 000 a week ago.

Yesterday, the Zimbabwe dollar  was trading at ZWL$21 709 :US$1 on the official market.

Eddie Cross, an economist, presented a bleak picture.

“This year is going to be very tough. Currency is the number one problem. If this government doesn’t sort out currency, it can say goodbye to its targets,” Cross said.

He added: “The new governor could change Zimbabwe completely by introducing a free market for the currency.”

Another economist, Tinashe Kaduwo said : “Indeed, the incoming governor has a huge task. Confidence is something that is very difficult to instil in people. It will take time as confidence is built from a consistent demonstration of good policies, governance, transparency in communication among other things.”

“It is indeed not an easy task given the difficult economic outlook characterised by El Nino induced drought, low power generation, depressed commodity prices and so forth. “The lack of trust in the financial system, institutions, and policies has significantly impacted economic stability and the willingness to engage with the local currency. Restoring confidence is crucial for addressing the underlying challenges,” he said.

Jeff Makiwa, the Zimbabwe National Chamber of Commerce chief economist said Dr Mushayavanhu will need to  rein in the run-away exchange rate.

“He faces a challenging task given the current monetary crisis in Zimbabwe.

“Resolving these challenges will require a comprehensive approach that addresses the root causes of the crisis and avoids repeating the mistakes of the past,” Makiwa said.

“The incoming governor is expected to lead the RBZ’s focus on restoring confidence in the local currency and banking system, managing inflation, and stabilizing the exchange rate.

“This may involve implementing measures to curb excessive money printing and improving foreign currency management. Additionally, the Bank will need to enhance its close cooperation with other government agencies, the private sector, and international partners to implement coordinated policies that support economic stability and growth.

“While the task ahead is daunting, Dr Mushayavanhu experience and expertise will likely be valuable in navigating these challenges. However, success will depend on the commitment of all stakeholders to implementing sound economic policies and reforms,” he said.

Another economist, Brains Muchemwa said exchange rate management, in the majority of the African context, is not the preserve of the central bank alone, but a collective responsibility, with political actors having a greater voice  in the conversation than the technocrats.

“Mushayavanhu, as an outsider, may have amazing ideas on how to manage the exchange rate. However, once in the hot seat, he will need to count more on his persuasive skills to get politicians to lean on his side in order to pursue a progressive exchange rate management framework to stabilize the market,” Muchemwa said.

An investment advisor Welcome Mavingire said Dr Mushayavanhu will need  the co-operation  of all stakeholders  to halt  economic implosion.

“There are a lot of monetary challenges he is likely to face so we hope he will become a better prepared governor. Of course whether it works or not is a different matter and may be outside his control.

“I am not sure whether we can say we have a monetary crisis or just an exchange rate issue or whether it’s a purely monetary phenomenon or also a fiscal one,” Mavingire said.

He added: “ But either way I think the new governor, being a banker, has diagnosed what he thinks is the issue and will at least try to bring some solutions.”

Economist, Rufaro Hozheri, weighed in saying: “The challenge I see, and perhaps the incoming governor will have to deal with is the cost of debt in this country, I think it’s ridiculously expensive and unsustainable, as US$ lending increases I foresee a lot of defaulting taking place.”

Economic analyst Victor Boroma advised Mushayavanhu to deal with quasi-fiscal operations and devise a prudent monetary strategy.

“The central bank and the government are quite aware of what needs to be done in terms of reforms to ensure there is a stable local currency [if it is to be maintained].

“Critically an end to quasi fiscal operations which fuel money supply growth, over regulation of the forex market and managing inflation. There needs to be political will to allow the economy to stabilise and such decisions are made by the executive arm of government, “Boroma said.

 

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