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.
Ncube admitted that the country's surrogate bond note is not equal to the United States dollar, contradicting earlier government pronouncements on the currency. He was addressing British think-tank Chatham House in London yesterday, where he admitted that market forces were dictating government policy.
"The market is setting the pace. What is left for us is choreography and management of the economic fundamentals. The economy has dollarised. RTGS [real time gross settlement] balances are over $6 billion. The market is doing everything, we are going through a transition. The market has said these currencies [US dollar and bond notes] are not at par. I don't want to argue with the market. The bond notes will, at some point, have to be demonetised and I cannot tell you (when that will be)," Ncube said.
Below is Mthuli Ncube's latest press release:
Further to the various measures that Government is putting in to accelerate economic reforms that are necessary to right sizing the economy, it is critical to restate Government's great commitment to reducing fiscal imbalances which are the root cause of the many challenges the economy is facing.
The challenges include cash shortages and the proliferation of foreign exchange parallel market rates which have a negative effect on prices. These challenges require that Government position the economy on a strong footing by implementing reforms that 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.
These reforms shall be accompanied by a strong and sustainable currency reform system which will follow after the execution of the above reforms. 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.
Accordingly and 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
sustainable currency reform system which will follow after the execution of the above reforms. 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.
Accordingly and 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.
Over and above the Nostro Deposit Protection Guarantee from Afreximbank, we are 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.
Government recognise 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.
Hon. Prof. Mthuli Ncube
Minister of Finance anti Economic Development
10 October 2018
