Treasury secretary Tim Geithner on printing money at a Zimbabwe Independent
dialogue function in Harare this week.
The US is hoping to raise the federal debt limit by the beginning of August
this year to avoid another economic crisis.
Gono’s advice was not without basis. The Reserve Bank governor has done it
and seen it all. Until 2009 he had an unenviable appetite for printing money
and stoking inflation.
By the time government adopted multiple currencies, the legendary Weimar
Republic’s runaway inflation was a non-event by comparison as a single
Zimbabwe bearer’s bill was as high as Z$10 trillion.
But Gono said his worry was broader than just stopping the Yankees from
running the printing press as he did to finance a budget deficit come
August, but given Zimbabwe’s economic reliance on the stability of the
American currency, the US economic crunch could impact on Zimbabwe.
“If that doesn’t weaken a currency I don’t know what will,” said Gono. “Get
it from me; I have got experience in that. So if there is something that I
can teach the world, it is free advice to the US and those countries that
are relying on the printing press; don’t do it.”
“Please my brother from the US embassy, take that message to the treasury
secretary and say there is ‘some little bugger’ there who has a lot of
experience. He says he loses sleep when he sees you printing (money),
printing against a background where he has attached his economic fortunes on
you.”
Gono warns there is need to insulate Zimbabwe from possible US
dollar-related shocks should the Americans choose to finance debt through
printing money.
“They (US) behave in the same manner I was behaving. At least I have
repented. We cannot, after the global financial crisis that started in the
US, have a continuation of printing money....why is China getting rid of US
dollar stocks and buying properties? Therefore let us not be caught
napping,” Gono said.
This, Gono said, could present problems for Zimbabwe which relies on the
stability of the unit.
Zimbabwe’s banking sector was stable and attacked the International Monetary
Fund’s template reports that always said the country’s banking sector was
“vulnerable.”
Asked by former Finance minister Simba Makoni why monetary authorities and
government had been quiet on the Zimbabwe dollar account-holder balances,
Gono replied his upcoming monetary policy statement would give direction on
the matter.
“Sometimes we use silence to manage the situation,” he said.
Gono said Zimbabwe would only revert to its old currency once the economy
had grown to sustainable levels.
“Let me say that no self-respecting nation in the world can do without its
own currency. Even some of those nations that have gone into common markets
chose to keep their own currency. Britain is part of the EU but has decided
to keep their pound sterling,” he said. “There are also times when it is
necessary to step back and reconfigure yourself before you go about wanting
your own currency and we are in that phase.”
He defended local banks’ loan book sizes, saying loan to deposit ratios were
largely in line with regional levels.
Gono also had words of wisdom for the government: “Walk the talk on policy
implementation.”
He praised Zimbabwe for what he described as “elaborate and award winning”
economic blueprints that fall short on implementation.
“We fall short on the implementation table,” he said.
The central bank boss said there was need to have both the macro and micro
side of the economy working.
Twenty of the 25 banking institutions in the country, excluding POSB which
is regulated under a separate statute, had complied with the central bank’s
prescribed minimum paid-up capital requirements by end of March, while 15
out of 16 asset management companies had complied with the minimum paid-up
equity capital requirement of US$500 000 by end of June.
“Going forward, the Reserve Bank is going to meet all undercapitalised
banking institutions, together with their boards and shareholders, to
determine the way forward on a case by case basis.”
Although the banking sector was largely stable, Gono said protracted
re-capitalisation processes of some banking institutions, tight liquidity
conditions mainly attributable to volatile short-term transitory deposits
and limited lines of credit, low savings owing to low salaries and wages,
and low interest income against high operational costs, presented threats to
the stability of the sector.
Gono urged banks to promote a savings culture in the economy by offering
meaningful deposit rates and lowering bank charges.
Banks are relying on non-funded income such as bank charges to make money.
No comments:
Post a Comment