Last week, the Reserve Bank of Zimbabwe (RBZ) governor, John Mangudya, presented a high sounding Monetary Policy Statement (MPS), but is now sending different signals with worrying rapidity.
While we believed the MPS was a positive move after Mangudya liberalised the foreign currency market, the greatest fear now is that the people’s savings may be wiped out following the vacillating demeanour displayed by the central bank this week.
In a show of vanity, Mangudya, this week reviewed upwards the retention rates for gold producers and tobacco farmers, a clear sign that the MPS was pronounced immaturely and without proper consultation.
The central bank will now offer gold miners a special rate of 1:3,5 after capitulating to demands by yellow metal producers who had rejected the 55 percent forex retention, while tobacco farmers had also the last laugh after being offered 50 percent retention rate after initially being set on 30 percent. Herein lies our fear that the central bank may fail to protect the people’s savings in the aftermath of these unplanned changes taking into consideration that RBZ still has outstanding issues with savings that were lost after the country ditched its defenceless Zimbabwe dollar due to hyperinflationary pressures in 2009.
Soon after assuming office in 2014, Mangudya, assured the banking public that they would be compensated after losing their money.
Insurance policy holders lost more than $3 billion in pensions and insurance policy contributions, this is according to a report by a Commission of Enquiry set up by former president Robert Mugabe in 2015, to look into conversion of insurance and pension values from the Zimbabwean dollars, which was ditched after value erosion due to hyperinflation, to the United States dollars.
Now, they are growing fears that investments would be dragged into the drain again.
Last week, Mangudya admitted that safeguards needed to be put in place to protect savings.
“All genuine or normal bank accounts, other than loan accounts, as at 31 December 2008 would be paid an equal flat amount of US$5 per account. “The then prevailing United Nations (UN) exchange rate would be used to convert Z$ balances that were as a result of arbitrage opportunities ‘burning’ and for Zimbabwe dollar cash to be received from the walk-in banking public,” Mangudya said.
But to date no one has received anything in that regard.
There is no doubt that the liberalisation of the local currency will have an effect on people’s savings given that the rate is now officially pegged at 1:2,5, while indications are that the local unit might be further devalued to 3,5, a rate informal currency traders are charging, after the central bank buckled to demands from the farmers and gold miners this week.
There are fears that Zimbabweans who had saved for their old age will be offered paltry life’s savings and pensions with workers’ salaries risking being choked further by the ascending interbank rate.
At opening of interbank foreign exchange trades, local banks traded the greenback at 2,5 against the local currency now referred to as real time gross settlement (RTGS dollars last week. Some analysts believe the RBZ should ring-fence people’s savings.
Payouts for retirees are currently pegged at about $80 a month on average, which translates to $960 a year to pay their bills and live in retirement. The average civil servant in Zimbabwe takes home around RTGS 300 dollar, meaning at the official rate of 1:2,5, many will be hovering around RTGS 120 dollar against a backdrop of rising inflation and prices. Inflation for February stood at 50,6 percent.
