PRESIDENT Emmerson Mnangagwa last week appointed John Mushayavanhu as the governor of the Reserve Bank of Zimbabwe for a period of five years, beginning on March 28.
He replaced John Mangudya.
Mushayavanhu, a veteran banker with over 30 years’ experience, assumes governorship at a time the banking sector is facing a plethora of challenges, chief among them a confidence deficit.
He takes office at a time when the value of the Zimbabwean currency is plummeting, having lost over 70% of its value since the beginning of the year.
The black market rate skipped from around US$1:ZW$20 000 last week to US$1:ZW$40 000 this week, a 50% currency depreciation within seven days. This, according to Zimbabwe Stock Exchange (ZSE) technician, can be blamed on excessive money supply, which is estimated to be 709% in the last two years, leading to an economic Steven Hanke’s estimated local currency inflation of 1 600%.
In addition, politicians have a history of misusing the institution that the former CEO of FBC Holdings is now running. It lacks independence. It also has a history of exploring quasi-fiscal endeavours, which are typically expenses made at a loss or at a rate lower than typical profit. The central bank has engaged in these kinds of operations over decades. Among them was the farm mechanisation initiative, which the Treasury ought to have overseen.
The International Monetary Fund early this year urged the central bank to desist from ruinous quasi-fiscal activities and stick to its legal mandate of focusing on private sector growth to help economic recovery. The local currency has collapsed under its watch, and the economy is still fiddling. We sincerely hope that the newly appointed governor would use his years of experience to make up for the wrongs caused by the past. If he does not accomplish that, he will be remembered as a failure, just like some of his forerunners.
Throughout his five-year term, he ought to ensure that the central bank upholds its legal duty and manages the money supply.
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He should remind politicians that they ought to consume what they kill. High bank service fees are a problem that the new governor needs to address. If you deposit US$100 into your account and you do not make any transactions, your account will be wiped out after 20 months since the banks charge an absurd US$5 per month to maintain your account open.
Long back, one would earn interest by keeping money in a bank account in Zimbabwe. Today if you leave money in your bank and return in a few months, you will owe the bank money. Put otherwise, those who make deposits into banks face penalties for doing so.
For this reason, some choose to store their cash beneath their mattresses. Finally, we want to implore politicians to refrain from meddling in the operations of the central bank. They should stop making the apex bank their money making machine.
