You have to give your country boy pardon for going AWOL; but it is always good to be back.
I come back at a time when the Reserve Bank of Zimbabwe is expected to announce the Mid-Term Monetary Policy Statement tomorrow, and when a number of developments take place on a macroeconomic level.
The central bank is more than ever necessary to stand up for the occasion.
People, the central bank, presents monetary policy at a time when inflation was rising to close the month of August at 4.83 percent, not far from the highest dollar exchange rate of 5.3 percent recorded in May 2010.
On the international front, the Federal Reserve Bank of the United States also raised interest rates by 25 basis points. A new increase is expected in December, with another three extra points for next year.
The rate hikes by the Fed are likely to strengthen the greenback, which could affect Zimbabwe's exports, especially to South Africa, our largest trading partner. This can also stimulate imports from all over the Limpopo, causing the country's balance of payments position to deteriorate.
The position could also reduce money transfers from South Africa, where the majority of Zimbabwean migrants live, as the border has already weakened against the dollar. In addition, the increase may also affect the gold price at a time when gold is one of the country's largest export products.
It raises the question of whether the US dollar is still the sustainable currency to support the economic turnaround of Zimbabwe. It raises the question of how the central bank, which is constitutionally obliged to protect the currency of Zimbabwe, will respond to ensure that there is a currency matrix that supports optimal growth and development.
The central bank already has to cope with trust consciousness as a result of various acts of commission or omission.
The structural architecture of the central bank itself does not exude much self-confidence. That is why Zimbabwe is sometimes mentioned among African countries with central banks that could do better reforms.
So apart from funding, would it take a penny to reform the central bank to ensure greater transparency, accountability and independence? Of course not.
The central bank must be competent to expose tax abuses in the country. This independence will protect the monetary authorities from short-term political influence in fulfilling their mandate.
Promoting independence will help address some of the double standards attributed by the different stakeholders to the central bank. For example, while the central bank has called for market discipline, it is not itself disciplined when it comes to expanding excessive overdrafts to the government.
This has led to crowding out of the private sector. It also increased the gap between RTGS balances and cash, and reduced the ratio of cash to deposits. This increasing gap, coupled with the pegged exchange rate, has caused a shortage of foreign currencies on the official markets and has created a thriving parallel market that charges usury premiums, thereby increasing production costs.
This has pushed up the prices of goods and services. All this comes against stagnant salaries.
By playing its role of regulation of the monetary system and the management of the currency system, the central bank must promote balanced and sustainable economic growth. This is only possible if we have common sense in our financial systems, and that is why structural and administrative reforms are indispensable for a well-functioning central bank.
Without such a structural set-up, monetary policy will continue to come with strategies that will not instill confidence.
Monetary policy in the medium term must therefore seek to introduce concrete monetary reforms inspired by the reality of the market and capable of decisively dealing with green shortages, speculation, externalization of hard currency, hoarding and rent search on the foreign exchange market.
The central bank must also not ignore its own rules if they are to be taken seriously. Almost two years after the introduction of bond notes, for example, the central bank has not yet appointed an independent board to keep the banknotes in circulation. The bank had promised to do this.
Questions should also be raised as to whether it is practical to continue to insist on an equivalent exchange rate between RTGS, bonds and US dollars when the allocation mechanism deteriorates. Already received articles that are classified in the list of top priority for forex, not enough adequate foreign currency.
The central bank must urgently use monetary policy instruments to bridge the gap between the official rate and that of the parallel market, with particular attention to the supply side of the market. At the moment, the parallel market seems to be the only market where supply and demand interact to determine the exchange rate.
This has left your cowboy behind with the question who exactly is the governor of the Parallel Market Reserve Bank.
Given the ever increasing gap between parallel market and official prices, it is sensible that the central bank is considering selling forex at half the premium charged by the parallel market. However, this should not be detrimental to the public in terms of bank amounts in US dollars.
The balances can be protected and honored within a certain period as the inflow of foreign currencies improves. After doing so, the central bank can allow some flexibility in the allocation of foreign currencies.
A large part of the demand for the hard currency is unjustified because it comes from an excessive money supply that will fade away as soon as things fall into place.
Clemence Machadu is an economist, researcher and consultant. He writes for The Sunday Mail in a personal capacity.