BusinessWeekly Last Word
The Reserve Bank of Zimbabwe, and to a lesser extent the Ministry of Finance and Economic Development, need to be far more active in making public decent and timeous statistics and taking the people of Zimbabwe more into their confidence.
We get snippets of news in the required monetary and fiscal policy statements, and frequently this is good news, or at least far better news than rumour and misinformation spread on social media have accustomed Zimbabweans to accept.
But such snippets are few and far between. Regular tabulated statistical returns could do far more to provide accurate and high quality information that would make many rumours and “viral” messages obviously false.
Both the RBZ and the Ministry have decided, and in our view have decided correctly, to rely on market mechanisms in their transitional stabilisation programmes so as to ensure that these programmes rely on fundamentals rather than wishful thinking. But the use of markets requires that markets have access to accurate information and that everything is out in the open, with both monetary and fiscal authorities being quite transparent.
The veils of secrecy unfortunately create an attitude that there are secret plots and that there are underhand and unethical behaviour, if not outright criminal activity, being condoned and protected.
In the latest public relations mess affecting the Reserve Bank, a WhatsApp message started circulating at velocity over the weekend, ending up in a large number of groups and scaring a lot of people. This used a four-month-old RBZ circular, a copy of which accompanied the much repeated message, along with a fairly vicious interpretation that the Reserve Bank was planning on “raiding” nostro accounts. The RBZ said the old circular had been incorrectly interpreted out of context and that there was no intention to “raid” nostro accounts.
Interestingly, it would be quite legal for the RBZ to force sales of some foreign currency holdings, specifically retained export earnings that had neither been used nor sold within a set time-limit. Indeed as the RTGS dollar became a legal currency, and a major export incentive was to allow exporters to retain a portion of their foreign payments, it was stated that these retained earnings could only be kept for a maximum of 30 days and that exporters had that time to use the retained sums in their nostro account to pay foreign suppliers or sell what they did not use on the interbank market. As a result of frantic consultation, this was not enforced.
At the moment a significant majority of Zimbabwe’s foreign currency holdings are in these private nostro accounts since net exporters generally go to quite extreme lengths to keep their cash reserves in foreign currency, quite legally, and either dribble sales or borrow RTGS dollars to pay local bills.
This is one of the reasons why interest rates were raised significantly, to give more incentives for sales, and why there has been a general tightening of just what can be paid from this particular set of nostro accounts to prevent currency sales away from the interbank market.
There is now a growing but still minority group who would like to see deadlines to use or sell retained export earnings be set and enforced as another large step towards turning the virtual Zimbabwean dollar into a real national currency. But this is one of those policies that could be announced with reasonable notice and such an announcement would carefully specify which nostro holdings had to be liquidated by when and which could continue to be held for all eternity. A WhatsApp message by an economic illiterate would obviously not differentiate between free funds and various forms of export earnings.
The Reserve Bank has been hit by other rumours and social media messages, suggesting that some rather important people have been allowed to bend all sorts of rules or that there have been cover-ups of distasteful or even illegal behaviour. The decisive action, taken later than it should have been, in September when a small number of bank accounts were frozen should have helped kill that perception, but regrettably did not.
The RBZ needs to build public trust and this is less difficult than it sounds, although will be time-consuming. Each week the central bank should be able to issue basic statistical tables showing the nostro, bond cash and RTGS holdings of each bank, with the nostro sums split between the total for customers and the total for the banks themselves.
Other useful weekly statistics would be the amount of business on the interbank market, and useful indicators like the total money supply, the amount of issued treasury bills and anything else that economists and even economically literate people would like to see.
This could be complemented the other side of Third Street by a simply monthly income and expenditure account from the Finance Ministry. It needs to be monthly because that is how its accounts work. But this would show timeously the effects of the tight budgeting and tight fiscal management, and start getting people to believe that the wheels are still on. Again rumour kills half the progress the country is making.
Everyone is aware that both the RBZ and the Finance Ministry have to sometimes make emergency decisions or make policy changes where advance notice would be a bad idea. But these events are not daily or even weekly and can be made against the background of an exceptionally high level of transparency in the regular business of the economy.
Rumour and stupid or malicious messages flourish in the dark. Bright lights drive them away. A decent flow of accurate information will swamp the innuendo and snide remarks and the very unfortunate sort of remarks that are all too often heard.
The Second Republic has made large strides in cleaning up the mess it inherited. But it also needs to ensure that those entrenched in the past, either as actors or as those acted upon, do not accidentally or deliberately derail the reforms because they have been kept in the dark.