South African Reserve Bank governor Tito Mboweni told MPs on Friday that there can be no question of linking the Zimbabwean dollar to the rand.
He said to the portfolio committee on finance that the matter has not been considered by the Reserve Bank, nor by the Zimbabwean Reserve Bank, nor has it been raised by the Zimbabwean Finance Ministry.
“That discussion does not exist,” he insisted. And he blamed the notion on journalists having taken too long over their lunches.
MPs on the committee, however, were keen to know whether it would be possible to link the Zimbabwean currency to the rand through the Common Monetary Area (CMA), which includes Namibia, Swaziland and Lesotho
But Mboweni pointed out that Botswana, the most likely customer for such monetary alignment, is not a member of the CMA, although it is a member of the Southern African Customs Union (Sacu).
He suggested that regional integration could start with a central bank being established for Sacu, which other Southern African Development Community countries could join if they can conform to the convergence criteria.
Such criteria would involve a convergence of budget deficits, of inflation rates and other indexes. The moment a country meets the criteria, it can join.
Mboweni indicated that this was what happens with the Euro region, where as the new entrants to the European Union meet the convergence criteria, they are allowed to join.
He suggested that Zimbabwean inflation is now running at above 5 000% a year, and that the Reserve Bank in South Africa continues to offer their Zimbabwean colleagues help. But there is little more that can be done. He suggested that that country’s problems are political and can only be solved politically.
Meanwhile, he told MPS that the price of electricity is going to have a bad effect on inflation.
“You can’t hike the electricity tariff by 18%,” he said. “It means you have to increase interest rates much more steeply to counter the effects of electricity pricing.” — I-Net Bridge