/ 24 March 2014

Zim’s new central bank governor faces currency constraint

Zimbabwe's Finance Minister Patrick Chinamasa
Zimbabwe's Finance Minister Patrick Chinamasa

Zimbabwe’s incoming central bank Governor John Panonetsa Mangudya will face a restricted role focusing on regulation because the country doesn't have its own currency, said Tony Hawkins, an economist and member of the bank's board.

Mangudya (51), who is currently chief executive officer of CBZ Holdings, the country's biggest bank by assets, will take up his position from May 1, Finance Minister Patrick Chinamasa said on March 22.

Zimbabwe abandoned its local currency in 2009 in favour of multiple foreign currencies, including the dollar and South African rand, to help contain hyper-inflation.

"There's very little he can do in a country that has dollarised, so the focus has to be on regulation rather than monetary controls," Hawkins, a professor at the University of Zimbabwe, said in a phone interview on Monday from the capital, Harare.

Chinamasa said Mangudya is a "Keynesian economist who believes in discretionary fiscal and monetary policies," Zimbabwe’s state-controlled Sunday Mail reported on Sunday. Mangudya declined to comment on his appointment when called on his mobile phone on Monday.

"Mangudya is a substantial figure and well-trained with lots of experience, but the governor's job is seriously constrained by the dollar economy," Hawkins said. "Money supply is obviously out of the bank's control, as are interest rates." 

Gideon Gono resigned on November 29 as governor after completing two five-year terms. During that time the central bank printed money to pay the government's debts, fuelling inflation to an estimated 500-billion%, according to the International Monetary Fund.

Charity Dhliwayo, the acting governor, will retain her position as deputy until her term expires in April 2017, Chinamasa said. – Bloomberg