Why Should The Economy Be Governed By Someone Who Just Arbitrarily Declares An Exchange Rate On Social Media Asks Mangudya

The Governor of the Reserve Bank of Zimbabwe is currently giving oral evidence before the parliamentary committee on Budget, Finance and Economic Development. The committee is chaired by former minister of finance, Tendai Biti. The topic of discussion is Mangudya’s recently delivered monetary policy statement.

As expected, most of the conversation is centred on the introduction of the RTGS dollar and the resumption of an interbank foreign currency market. Some of the discourse almost escalated into high emotions but tempers almost immediately cooled.

The governor was asked why the RBZ would not just match the exchange rate that’s prevailing on the parallel market. He responded that the whole economy must not be dictated by random people who just announce exchange rates on social media.

Mangudya said that the volume of trade on the parallel market is not even that high and such low volumes did not warrant such a high exchange rate. He said the daily volumes on the parallel market were around $1000 in total daily or at most $5000. Thus it doesn’t make sense for the parallel market to be taken seriously is essentially what the governor was saying.

$1000 daily?

We don’t have data on volumes obviously but some of us personally know people who have traded way above that much in a day and do so consistently. The governor may have his figures wrong there.

Even if it’s true that the volumes are so low, that could be more a reflection of the liquidity of the market itself. And no, the rates are not determined by someone on social media although there are people who update on the going rates via social media.

The parallel market could be exhibiting more of the ‘willing seller, willing buyer” position than the interbank rate.