Opinion: RBZ Should Reform

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The role of the Central bank in Zimbabwe is hazy from the time of Gideon Gono to the current governor, the role of the Central bank needs to be Constitutionally spelt out. 

The Republic Bank of Zimbabwe’s primary role should be protection of the purchasing power of the Zimbabwean Dollar, a role it has failed dismally over the last 20 or so years. 

Stability of Currency should be key. A currency should be stable with little depreciation of 100 years. From 1990 onwards with the advent of ESAP the Zimbabwean Dollar has never been stable.

Furthermore the RBZ needs to be an independent institution not subject to politicians. 

The RBZ needs Inflation Targeting as a policy stated in the constitution. And the Constitution should only allow inflation of 6% or below.

If Inflation exceeds 6%, the Constitution should clearly state the dissolution of government and the holding of general elections. 

I propose Inflation Targeting as a Constitutional provision. Inflation should not go beyond 6%. Inflation is due to bad management of the economy. Period. 

Appointment of RBZ governor.

This position should be available through Public Nominations. The public should nominate through a transparent process and an independent panel select the best candidate.

The president merely Announced the best candidate. This institution historically ran an economy to protect government interests rather than people’s progress.

The bank should desist from financialisation which is trying to solve every problem using financial instruments

Without addressing fundamentals of production and export the bank will only be shuffling feet in sand. And worse still the bank has IMF and ZANU PF on it’s neck. 

We need deeper financial reforms, because there is a lot of wastage in economy. 

I recommend the bank should be inflation targeting. It is hard task when macro environment is characterised by market failure caused by political meddling in markets and corruption.

And when you have a large informal sector it is quite tough to create an economic surplus because much of that productivity is not banked.

Mostly the reserve bank should stop being reduced to role of paymaster for an inefficient public sector.

The bank has a bit of lee way on monetary policy nevermind the rigs and bond experiments. The nemesis to bank’s operations is government poor implementation of fiscal policy.

Financial Reform across corporate sector and public enterprises will help make job of Reserve Bank easy. And that is the critical issue in regards to changing our fortunes as nation.

I also wish Reserve Bank can help create demand by encouraging banks to be consumer friendly. Banks should offer financial products like consumer loans, students loans, overdrafts etc to create constant demand in market.

An innovative move will be to create electronic vouchers that ring fence capital to specific use. For example a loan to business would mean the business can only cash out on purchase of business inputs and that money would be invalid for corrupt use, diversion or externalisation

Bitcoin technology can allow such ring fencing of capital.

RBZ should develop an electronic currency parallel to real national currency that brings entrepreneurship to rural economy as well as make it possible to value under-utilised social capital in rural and lagging urban communities

It may sound like pie in the  sky thinking but without innovation we will continue fire fighting where we should be creating opportunities for economic growth.

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