By Shami Makombe
RESERVE Bank of Zimbabwe (RBZ) Governor John Mangudya has been rated among the worst central bank chiefs throughout the African continent by leading global financial review and analysis paper Global Finance.
Using input from world-renowned analysts, economists and financial industry sources, Global Finance each year grades the world’s leading central bankers on a scale of A to F, with A being the highest grade and F the lowest.
It says the rankings are “based on a series of objective and subjective metrics, including the appropriate implementation of monetary policy for the economic conditions of each country”.
Presenting its 27th annual Central Banker Report Cards, in which it grades the top leaders at approximately 100 central banks around the world, the financial magazine rated Mangudya at Grade C-, which is among lowest of the grades available.
For Mangudya, however, this is a slight improvement after he was rated lowest in Africa in 2020 by the same magazine, at Grade D.
“Over the past year and looking ahead, they central question for central bankers will be if and when to shift from bolstering economic activity to tapping the brakes,” said Global Finance in its introductory remarks.
“The last year kept central bank governors on high alert, as a global health crisis threatened fiscal as well as physical health.
“Although years of loose money left some with little room to add stimulus, central bankers used all the tools at their disposal to mitigate the immediate threat,” it said.
Regarding Mangudya, the magazine noted that he had scored some positives in the period under review, especially taming inflation down to reasonable levels.
“Zimbabwe’s central bank has been reveling over its prudent monetary policy stance that has resulted in year-on-year inflation dropping from 837.5% in July 2020 to 50.2% in August 2021.
“The bank’s monetary policy committee met in August and resolved to stay the course on the current stance, leading to a decision to hold the benchmark rate at 40%.
“Zimbabwe’s economy is on the road to recovery after years of turmoil, with last two being in recession,” said the magazine.
It adds: “Growth is projected at 3.9% in 2021 by the World Bank and 6% by IMF. The apex bank also wants commercial banks to help the recovery by encouraging their clients to invest in government securities.
“The bank (RBZ) has launched a regulatory sandbox framework to encourage innovations in the fintechs and further liberalized the operations of bureau de change to promote financial inclusion.”
Neighbouring Zambia’s central bank Governor Christopher Mphanza Mvunga, who also rated C- alongside Mangudya, has been described as struggling to control the country’s runway inflation.
“One year into office, Mvunga is struggling to contain runaway inflation and a weakening currency. The depreciation rate of the Kwacha declined to 3.6% in the second quarter compared to 4.4% in the first quarter.
“This comes when the asset quality of banking industry is being affected by elevated NPLs,” Global Finance noted.
It however said Mvunga would have his work cut out due to imoroved policies of the New Dawn government of Hichilema.
“The election of a new president in Zambia, Hakainde Hichilema, has ignited optimism in the country’s struggling economy. Hichilema defeated the incumbent, Edgar Lungu, with a landslide.
“When it met in late August, Bank of Zambia’s monetary policy committee steered clear of the political environment impacts on the economy, forecasting a modest growth of 1.6% in 2021.
“The bank maintained it repo rate at 8.50%. The rate was last adjusted in February by 50 basis points to contain inflation, which maintained an upward trend in the second quarter rising to 23.5% from 22.2% in the first quarter.”
As per the methodology used to arrive at the ratings, Global Finance revealed that its ratings are based on performance from July 1, 2020 to June 30, 2021.
“A governor must have held office for at least one year in order to receive a letter grade,” said the magazine.
“We apply an algorithm to increase the cohesion of the grades between the different geographical areas, with 100 signifying perfection.”
Initially appointed to the top job by former President Robert Mugabe after having led CBZ Bank for years, Mangudya is serving his last of two terms.
This follows the decision by President Mnangagwa who, acting in terms of Section 14 of the Reserve Bank Act [Chapter 22:15], handed Mangudya a second term with effect from 1st May 2019 for another five years.