Zimbabwe Coalition on Debt and Development (ZIMCODD) said that the growing public mistrust hinders future development prospects in its Monetary Policy: Beyond the Foreign Exchange Market analysis.
Mistrust between the government and the public has been blamed on limited deposits in financial institutions by bankers.
“It is extremely difficult for Zimbabwe to navigate the economic terrain in an import dependency economic situation worse still where there is gross public mistrust,” ZIMCODD says. “It is important to note that any currency is as strong as the level of public trust in that currency.”
“Speculation, arbitrage and hedging thrive in a situation where there is public trust deficit.”
The social justice group said the monetary authority should deliberately invest in active citizen engagement on implications of the proposed monetary policy. Moreso, especially on the foreign currency retention thresholds and also restrictions on buying of foreign currency from the interbank market.
“Whilst the monetary policy is clear on foreign currency retention allocations by sector, the 30 day foreign currency retention period after which it is liquidated at the going rate is de incentivizing,” ZIMCODD says.
“On one hand, the government is mistrusting the beneficiaries whilst the beneficiaries remain skeptical of the government’s intention.”
The new monetary policy reduced foreign currency retention to 30% from 50% for tobacco farmers and 55% from 70% for miners.
ZIMCODD also says the monetary authority should deliberately invest in active citizens engagement on restrictions on buying of foreign currency from the interbank market.
“Informal trading by nature involves buying and selling of commodities, most of which originates
from other countries,” ZIMCODD says. “By setting invoices as a precondition for purchase of foreign currency discriminates the informal sector players who for instance may not have the bonafide invoices
to justify the need for foreign currency but still in need of it.”
“Failure to access foreign currency will force them to source from the ‘black market.'”
“Since the policy is hinged upon a willing buyer willing seller basis, most foreign currency will be channelled to the black market.”
Analysts say the government’s aim of introducing a cashless society also eroded trust from the public.
“There’s a big confidence problem to overcome and that’s a very long-term thing to turn around, especially in Zimbabwe where business and confidence is so low,” Overseas Development Institute researcher said Judith Tyson.
