Forex Rate "Stability" Unsustainable, Says Tendai Biti
Former Finance Minister Tendai Biti has challenged the government to find a lasting solution to current economic challenges instead resorting to what he considers unsustainable short-term measures.
Biti, who is CCC deputy president, made the comments in response to a statement issued by the Reserve Bank of Zimbabwe (RBZ) this Monday outlining the resolutions made by its Monetary Policy Committee (MPC) on Friday last week.
Among other things, the MPC resolved to keep the Bank policy rate at 200% per annum.
The MPC said it had “noted with satisfaction that a combination of the tight monetary policy stance, favourable uptake of gold coins, effective monitoring and enforcement of market discipline… had resulted in the stability of the exchange rate and a decline in inflationary pressures.”
Biti argued that the “stability” will soon be a thing of the past as the government will need to pay civil servants and fund election promises resulting in an increased broad money supply. Said Biti:
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The economy can not be fixed by short-term measures that delay a crisis. Controlling money supply through suspension of contractual payments can buy short-term relief but contractors will have to be paid.
Further, the taps will open soon to support Command Agriculture Year-end bonuses must be paid & as Zim gets closer to an election there will be a floodgate of broad money as election promises are monetized.
The rate will implode unless the Zim$ is floated & full open use of the US$. A permanent lasting solution is required and not cheap mascara.
Government remains the biggest generator of broad money supply due to an expansionary fiscal policy.
They can’t live within their means & that is the challenge. Withholding payments, arresting or threatening business people can never be a sustainable tool of macro stability.