John Mangudya, governor of Zimbabwe, spent an enthusiastic time last week in a pre-budget seminar for Bulawayo lawmakers.
The FSS told Mangudya that the government's claim that the US dollar is trading at the same level as the bond note was behind the recent economic upheavals that saw many companies demand foreign exchange for payment.
Legislators say it is time for the government to dispose of the bonds introduced in 2016 to address cash shortfalls.
But Mangudya (JM) said in an interview with standard business reporter Mthandazo Nyoni (MN), the surrogate currency was a success.
He said foreign shortages can not be attributed to bonds. Below is an excerpt from the interview.
Minnesota: Did the Zimbabwe Reserve Bank (RBZ) foresee the current foreign exchange crisis? If so, what steps have been taken to mitigate it?
JM: I made it clear that fiscal imbalances are adding to the demand pressures on foreign exchange, and that increased spending will increase consumer spending that requires foreign exchange.
Therefore, as the president said, it is necessary to reduce fiscal imbalances.
The Reserve Bank is committed to making financial arrangements to replenish foreign exchange receipts from exports and other sources.
MN: According to the pharmacist, RBZ is now not assigning foreign exchange to supplement them for several months. Why did you stop the allocation? Is it true that you make money to finance Zanu PF's car import and campaign trials?
JM: We continue to support pharmacists. During the last week of October 2018, approximately $ 10 million in cash and letters of credit were assigned to pharmaceuticals. So we do not know the months that you mentioned.
MN: Confusion in the currency market is not a sign that a bond note has failed?
JM: As we already know, bonds and bonds circulating in the economy account for about 4,5% of the money supply.
Therefore, the lack of foreign exchange can not be attributed to bonds, but it is evident that the demand for low productivity, foreign exchange and fiscal imbalances will increase.
Bond notes are export incentives that have a positive impact on exports growth of more than 34% in 2017 and 36% of exports in the last 10 months. Therefore, the bond note did not fail.
Minnesota: How much excessive government spending has contributed to the economic crisis since last November?
JM: The economy is expanding faster than creating the foreign exchange needed to keep up with the demand for goods and services.
MN: Some argue that RBZ is a big player in the foreign currency parallel market. What is your opinion on it?
JM: The Reserve Bank does not have the appetite to participate in the foreign currency parallel market without participation.
Minnesota: When are you going to switch the RTGS balance to the US dollar promised by the government?
JM: We will install the RTGS platform in April 2009 to settle the RTGS balance in US dollars and pay the foreign payment through the relevant bank.
The purpose of providing foreign exchange at 1: 1 to purchase essential products is designed to stabilize prices and make the prices lower. That way, the RTGS balance can be converted to US dollars.