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Ncube retracts London statement, says RTGS deposits will be maintained at 1:1

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HARARE – In what could largely be interpreted as a retraction of sorts, Finance and Economic Development Minister Mthuli Ncube has said that Government remains committed to preserve the value of RTGS deposits at the current exchange rate of 1 to 1. This he said is being done in order to protect people’s savings.

Ncube’s comments come after earlier his statements at an investor roadshow in London on Monday, had caused pandemonium within the market. Ncube had said that the market had already determined that RTGS bank balances are not at par with the US dollar and that Government would not intervene on devaluation and to control parallel market rates.

“The market has already determined that RTGS and bond notes are not at par with the US dollar and I am not about to argue with the market,” he told a roadshow at Chatham House.

His remarks saw most suppliers change their pricing terms while some products and services were withdrawn from the market due to the pricing conundrum. At what price should producers sell, particularly in a market, which outlawed any tier pricing systems.

In today’s statement, Ncube said: “Government recognises concerns surrounding RTGS deposits, and we commit to preserve the value of these balances on the current rate of exchange of 1 to 1, in order to protect people’s savings.”

He said that the challenges Government is facing, which include cash shortages and the proliferation of foreign exchange parallel market rates which have a negative effect on prices, require that Government position the economy on a strong footing by implementing reforms.

“Such reforms  include cutting on government expenditure, working towards import parity pricing system, increasing efficiency on government delivery systems and fast-tracking the State Owned Enterprises reforms, among a host of reforms.”

He added that the reforms should be accompanied by a strong and sustainable currency reform system. “This is necessary to ensure that any currency reform programme that the Government would put in place is effective and that it has minimum disruption to business.”

Ncube said in view of the need for an orderly currency reform programme that will be followed when the economic fundamentals are right to do, the country shall continue to use the multi-currency system which was put in place by Government in 2009.

“This system entails that foreign exchange earners are not prejudiced of their regulatory foreign exchange receipts and that those who do not earn foreign exchange have access to foreign exchange through the banking system as is per the current policy of foreign exchange management system. In parallel, the Reserve Bank shall continue to maintain adequate resources for the import of essential commodities.”

He said over and above the Nostro Deposit Protection Guarantee from Afreximbank, the ministry is also reinforcing Nostro foreign currency accounts with a statutory instrument to guarantee that these are private deposits, and neither the Reserve Bank nor government has any access to them.

 

 

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