Will the market catch a cold if Gono sneezes?
Historically the governor's statements have reflected enormous economic authority for a central bank chief in any country. Government officials have often pointed out that Zimbabwe's economic problems need an unorthodox approach to exorcise the recurrent economic problems.
Expectations on the MPS have always been unreasonably high. However, the governor has been a successful crusader for improving corporate governance in financial institutions, strengthening official supervision and improving market discipline.
Increasing the central bank's discretionary powers has created its own moral hazards. Theoretically this has only worked in countries with a strong rule of law and where supervisors are held accountable for their actions. The RBZ's previous boundless authority on its own has failed to address the country's economic regression. Redemption may yet lie in the social contract, an initiative previously mooted by the central bank itself.
Should investors expect major policy changes on Monday? Often addicted to shock therapy policy measures, the central bank has the capacity to reduce the market into a state of perpetual paralysis in a single afternoon. Although the state of the economy demands this possibility, the latest policy changes from central government which the governor didn't seem to support, such as price controls and the crackdown on businesses points to a different strategy.
More than likely, the MPS will complement rather than conflict with the fiscal policy. Regardless, it is unrealistic to expect that the governor will not tinker with the numbers or introduce at least one policy likely to change the course of business.
He may introduce a new currency, new denominations to the bearer notes or cut more zeros in an attempt to address inflationary pressures. With the supplementary budget now dismissed as inflationary, the market will be looking to Gono for direction.
Whatever the outcome, analysts already sensing blood, will most likely dismiss the MPS the following morning solely on the grounds that our human instincts predict the impossibility of a turn-around when fundamentals point towards economic decay.
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