If Dr. Mangudya lied, he deserves to keep his job!

THINK ON IT by CHRIS CHENGA

In the modern digital age, gossip plays out on public platforms. Times have changed. A while ago at the infancy of the internet, chat rooms were popular with folks of specific interests. It was ‘cliquey’ back then. Often literate and versed on specialised subject matter, the Netscape Navigator on dial-up confined grapevines of speculation and assumption to the real geeks.

Chat rooms were typically segmented between presumptive topics like the global financial system, political conspiracies, climate change, to any niche subject matter that entertained speculation and assumptions backed by referenced, logical, or scholarly insight. Though somewhat exclusive, the internet was intellectually intense on subject matter, heated even, expectedly from the convergence of profound knowledge confined in such small clusters.

But, the internet has thrived and expanded because it has brought democracy! Today, anybody with a connection can take part in almost any topic, regardless of lethargy in accruing their own acumen. Very few niche subject matters remain. Their presumptive nature of speculation and assumptions has been watered down on insight.

Since social media, democracy excels more on digital platforms of the internet than it does in electoral booths. Perhaps this is good. Everybody should have a say on subject matter that affects their daily livelihoods, the level of literacy to contribute insight on that subject matter becomes a secondary, maybe negligible, consideration. And so, the speculation and assumption of whether or not a central banker’s job is on the line plays out on public platforms; to the democratic participation of more than just the geeks of old grapevines.

Governments are starting to take the digital age seriously too, more from apprehensiveness than utilitarian enthusiasm. Just this week, newly appointed Permanent Secretary, Nick Mangwana, implored the Ministry of Information to open a Twitter account. Where democracy is, so should the establishment supposedly be. Obviously, the vitriol, resentment, and in instances rage, towards certain subject matter does not go unseen by governments.

Digital platforms not only offer more democracy than electoral booths, they provide space for more characters of expression. A Zimbabwean thread is just as expressive as any. So when Governor John Mangudya gave his Monetary Policy Statement on Monday, disapproval was expressed, only to reinforce the growing speculation and assumptions behind his continued tenure, which contractually comes to an end in August 2019.

Popular discourse is aggrieved by Mangudya’s supposed deception in assuring the public that Bond Notes were pegged to parity with the USD, and that balances reflected in fiduciary accounts were in all purposes of financial services functionality at parity to USDs. As Mangudya uttered that Nostro FCAs were to be separate from RTGS FCAs, it was as if to affirm that he indeed was culpable of deception. Well, assuming that the democracy of the internet cannot be overruled, an argument can be made that if Mangudya lied, he actually deserves to keep his job.

There was no way the masses were going to accept Bond Notes if the central bank had not persuaded them of their parity to the USD. The consequences of such a denial by the market would have been much more severely regrettable than where the nation finds itself today, which is at a point of opportunity to not only stabilise the economy, but to stimulate growth. If markets had refused Bond notes, bank runs were the likely outcome with depositors fighting to withdraw their incomes and savings.

In any bank run, hardly anybody ever salvages anything, even the ones who withdraw early. The ripple effects would have been dire, far reaching to pensions, and in no time daily business and market routines. The demise of the economy would have been evident in inflation, empty stock shelves, and realities of the infamous 2008 economy.

The only difference would have been that the economy would not have had the resolution of dollarisation. By the time Mangudya introduced bond notes, citizens were facing potential demonetisation due to a shortage of foreign currency, as compared to the prospects today of a less harsh devaluation. Like any good policy maker should have, he sold the right alternative to markets and the general population to save the economy from the direr outcome.

Perhaps there were faults in Mangudya introducing Bond notes, and the first would be that as he stabilised an economy from its own vices, he failed to tell a nation the truth about its citizens and its government. He failed to elaborate the root causes of why a globally desirable USD had become scarce in a productively inefficient and foreign consumption gluttoned economy.

The MPS highlights that the country’s current account deficit to GDP ratio declined from a peak of 20,4 percent in 2011 to about 1,8 percent in 2017. More simply, three years before Mangudya stepped into office, a nation without any sovereign printing capacity was at a deficit in net trade, net earnings on cross border investments, and net transfer payments to a level that was a fifth of its economy’s size. USDs were already leaving the economy at a fifth of the economy’s output.

The disappointment is evident on the internet, as many citizens long for the days where they would withdraw US$20 000 from the bank in cash within a traceable time frame and cross the border to enjoy consumptive holidays. This is imprudent. Even in the US which retains printing sovereignty, capital controls restrict such liberties to the point whereby foreign payments outside of business purposes have to be to a recipient of US residency, and in those instances a FATCA law enforces foreign banks to verify their clients have “US-person” status. Zimbabwe retained loose capital controls as consumers willingly increased outflows.

Behaviour is telling, during this era of gilded prosperity, by 2013, before Mangudya stepped into the central bank, non-performing loans in the banking sector were at a peak of 20,45 percent, way over the global average of 7 percent. At this point it is evident as to why the economy was not attracting long term capital investment into its financial sector. Now, non-performing loans stand at a modest 6 percent. Indeed, at sound consideration perhaps regular citizens and economic stakeholders such as banks were contributory to the inevitable bottoming of foreign currency shortages that forced Bond Notes.

Mangudya seems to have become emboldened to be more honest. His MPs states that “…the increased creation of money within the economy is mainly as a result of fiscal imbalances…” rightfully attributing the monetary challenges to government vices. All the monetary challenges that seem to be overwhelming the central bank are adopted from long standing political culture that enforces bad fiscal practices. Mangudya can only excel in stabilising the undesirable effects.

Notwithstanding his stabilising efforts, fiscal imbalances have taken a toll on already shorthanded monetary options. Today, due to fiscal mismanagement, the parity of bond notes to the USD, and that account balances functionality at parity to USDs can no longer hold. Devaluation is inevitable. How will the people judge the central banker who stabilised a foreseeable demise?

Perhaps if the speculation and assumptions were guided by referenced, logical, or scholarly insight, Mangudya would command some credibility. But, the democracy of digital platforms is no longer exclusive and it influences an apprehensive government. If Mangudya did deceive the nation, he did so by hiding it from its own vices. Sometimes nations do not want to hear those, let alone acknowledge them. So the truth may not matter for now.