Thread by @baba_nyenyedzi

1/12
I am going to say something positive about the MPC. Hold on tight.

It’s really one aspect. The rest was the usual jaba jaba.

The MPC increased RBZ interest rates from 40 to 60% pa. Giving a real positive interest rate. Albeit with a suspect inflation rate.

2/12
This is what the RBZ remit is all about. This is the major lever the central bank has. Yet it has been absent and useless for the last six years. The day Mangudya decided on Zim dollars the next thing he should have done is positive interest rates. That’s the only way

3/12
A central bank defends its currency & maintains monetary integrity of the whole system. By doing so it would rein in GOZ profligacy & mal investments in the market. Sakunda would never have happened.

So it was dereliction of duty by RBZ as prescribed by the constitution

4/12
In other words, the RBZ should never fix the exchange rate but support ZWL through positive interest rates. there was no need to expropriate from exporters. Because exporters would willingly exchange fx for ZWL to enjoy the high positive interest rates & certainty in ZWL

5/12
Positive interest rates are a signal of conservatism & efficient allocation of money credit in the system. Take the instances where treasury just doles out cash to its favourite cartel. Then treasury will be punished with punitive interest rates. Given the constitutional

6/12
Limit of GOZ overdraft & inability of cartel arbitrage the condonation bill of US$11bn would never have happened.

Sakunda & the cartels make money from the simple arbitrage between USD & ZWL.RBZ closes the arbitrage through interest rates. Then the cartels are forced to be

7/12
Productive & increase production. RBZ monetary policy of positive interest rates forces production & stops speculation & arbitrage. You can only borrow & be able to pay back only from production.

8/12
So this MPC move six years later is positive but unfortunately little too late, because
(i)they’re vested interests that will fight this
(ii) One swallow doesn’t make a summer
(iii) RBZ has zero credibility
(iv) Election season is upon us
(v) Increased resistance to float FX

9/12
(vi) There is too much money in the system already that is $330bnzwl plus $420bn zwl ( RBZ hole that must eventually be monetized). So high positive interest rate stop further money creation. But what do you do with the money currently in the system.
(vii) Is GOZ prepared to

10/12
Halt the infrastructure work it’s currently doing? Which has been funded through TB’s & eventual deficit funding? Or it will expropriate from exporters & pay in ZWL? This will not help . Because exporter viability is at stake. & paying exporters ZWL only increases

11/12
The supply of ZWL in the market. A market that’s already awash with ZWL.

So a brave policy in a sea of structural problem will only help partially. Can RBZ sustain this when inflation goes beyond 100%? this inflicts pain on cartel & GOZ used to profiting from arbitrage

12/12
Comes back to what is needed.

A currency board meets the demands of all parties and takes away the political pressure off RBZ.

To forces Production and stops arbitrage & speculation especially by those that get free money from treasury.