Contrary to recent sentiments by Reserve Bank of Zimbabwe (RBZ) governor John Mushayavanhu that the ‘printing machine has been switched off,’ the country’s money supply is literally out of hand says renowned American economic analyst Professor Steve Hanke.
Hanke who is known for tracking troubled currencies across the globe says Zimbabwe’s M2 is at 246 percent per year, a condition which could be hard to contain.
“Zimbabwe’s money supply (M2) continues to SURGE out of control at 246%/yr.
“That’s why, today, I measure Zimbabwe’s inflation at a PUNISHING 1266%/yr — THE HIGHEST IN THE WORLD.
“ZIM’s ECONOMY PLUNGES OVER VICTORIA FALLS,” he says.
Apparently, Mushayavanhu recently made claims that the country’s currency Zimbabwe Gold (ZiG) would never lose values again, citing an increase in gold reserves backing the ZiG to over US$450 million.
He also attributed his sentiments on money supply which he said is under control, while emphasising that gold reserves will continue to grow.
“As the central bank, we remain committed to economic stability in anchoring economic growth. I am not expecting any further movements in the exchange rate.
“Let me give you some figures. As of yesterday, total deposits in this whole market were ZiG10,7 billion reserves, and our foreign reserves were US$450 million.
“Let me emphasise that, indeed,, our currency is backed by gold and other precious metals, and the foreign currency balances that we have with the Federal Reser,ve, there is a difference between backing a currency with gold and linking a currency to the prices of gold,” he said.
However, prominent Zimbabwean economist Professor Gift Mugano differed with Mushayavanhu saying he has no control over Treasury’s insatiable appetite for spending.
“The exchange rate will not stabilize because
@ReserveBankZIM has no control over excessive liquidity coming from treasury. Watch out on the following:
- Funding of the upcoming agricultural season
- Payment of bonuses & increases in ZiG salaries
- Increase in payments to contractors as GoZ ahead of the rain season
- Last minute payments by treasury to Ministries, Departments, Agencies & suppliers as is always the case in December every – treasury always do last minute payments before the end of the fiscal year.
The question which arises is that if the rate crashed in September before these anticipated huge payments, what is the fate of Mr ZiG in the next 3 months?”
He added: Without production, there can be no stable currency. Without public confidence, stability in currency is unattainable.
“Without political will, Zimbabwe is doomed to fail!”
Zwnews
