John Mushayavanhu, Zimbabwe’s new central bank governor, has a gargantuan task ahead of him: restore credibility to an institution better known for printing 100 trillion dollar bills and 200% interest rates than coherent monetary policy.
The ex-Standard Chartered Plc banker’s big moment arrives on Friday — a week after he assumed his new role at the Reserve Bank of Zimbabwe — when he’ll present his first monetary policy statement, and make his first attempt at fixing Africa’s worst-performing currency and addressing one of the world’s highest inflation rates. It may include plans to create a currency board and back the local dollar with gold — a commodity the resource-rich nation has been stockpiling since 2022 — Finance Minister Mthuli Ncube has said.
“No matter how technically sound the polices can be, the key issue is confidence,” said Lloyd Mlotshwa, the head of research at IH Securities. The central bank has suffered “reputational damage” over the past two to three decades because of its unorthodox policy, and any move tends to be met cautiously by the market, he added.
Mushayavanhu’s predecessor John Mangudya in his 10-year tenure introduced unconventional reforms to reverse the Zimbabwe dollar’s slide, including introducing gold coins and promoting bullion-backed digital tokens known as ZiG. Each failed, and sparked criticism from the International Monetary Fund and World Bank.
The currency has depreciated every single trading day this year against the US dollar, shedding more than three-quarters of its value. Concerns over its future have led citizens to hoard US dollars and investors to put on hold large transactions, according to IH Securities, a Harare-based brokerage firm.
The authorities have repeatedly tried to rescue the Zimbabwean dollar since its reintroduction in 2019 after scrapping it a decade earlier when hyperinflation erased its value.
The IMF has proposed that the new governor sets the nation on a path of using an “effective” exchange rate and monetary policies, a spokesperson for the lender said in an emailed response to questions. At the end of a staff visit to Zimbabwe in February, it warned that the exchange rate must be fully liberalized.
John The Second
Mushayavanhu is the former chief executive officer of FBC Holdings Ltd., and has been nicknamed “John the Second” by the market to differentiate him from his predecessor. He’s expected to adopt a conservative approach at the central bank and restore orthodox practices.
“We want the person at the helm to make the market believe again,” said Persistence Gwanyanya, a monetary policy committee member. But “it’s been very tough and made tougher because we have not supported our governors.”
Over the past few months, anxiety over the monetary policy statement’s release had led the “whole nation to stop working,” said Lawrence Nyazema, president of the Bankers Association of Zimbabwe, in reference to the wait-and-see approach adopted by most businesses. “His style will be to engage with the banking sector,” he added.
Since being named to the position in December, Mushayavanhu has been shadowing Mangudya and participating in high-level meetings including with an IMF mission in February, to get a better understanding of how to fix the country’s macroeconomic challenges. One of his first steps was canceling a costly weekly central bank dollar auction for companies run by the central bank since 2020 that’s been criticized for providing dollars at a discount, according to Eddie Cross, a former MPC member who has met with him multiple times.
“He has already had a huge impact on the situation,” said Cross. “Now he has a huge job ahead of him.”