Over six billion excess liquidity mopped from markets

By Chance Baniko

This week witnessed a lot of debate on the press as to whether or not the Central Bank’s injection of the US dollar into the markets is useful to mitigate the effects of the soaring inflation that has affected the economy.

Some self-proclaimed lay economists are busy peddling ignorance and unproven psychosocial conspiracy theories that go as far as saying that there are vested interests in the dollar allocation to some forex bureaus, or that there is corruption involved in the process, creating nothing more than speculative journalism.

What those critics are missing in the US dollar allocation narrative is that it is not meant to make some forex bureaus rich overnight, or others poor in the process. The overall objective is to mop out the excess liquidity SSP circulating in the markets that has caused this inflation in the first place.

The current inflation biting the country was caused by a variety of factors including deficit financing by the government at the onset of the conflict in the country. Deficit financing means that the government borrowed a lot of money from the Central Bank to pay wages of the civil servants amongst others.

This means a lot of money has gone out into the markets in billions of SSP, and has remained so in circulation over the last few years. Something needs to happen to bring this cash into the banking system. One of the instruments through which this huge amount can be brought back into the Central Bank is through injecting the US dollar in the markets to mop up the excess cash in circulation.

So far over 6 billion SSP excess liquidity has been mopped from circulation in the markets which is an achievement since December 2020. However it seems this good effort evades the notice of both the press as well as the lay economists.

If this is the result of what the weekly auction has produced in a short period of time, does this amount to corruption or what those economists are calling vested interests?

Corruption is all about doing things in darkness. Anyone who is peddling doubts out there should come to the Central Bank and observe the transparency of the process of the auction so as to avoid peddling rumor mongering in the press and beyond.

Not until this excess cash is mopped from the markets, no one can talk of economic stability. The Central Bank is playing this pivotal role of market stability seriously.

The revitalization of the economy of the country is not the job of the Central Bank alone; other institutions whose mandates have been ignorantly placed on the neck of the Central Bank must do their part, as a collective effort, that will create a conducive business environment through which the economy can thrive.

This means attracting investors into the young economy, through enacting business friendly legislations to woo investors in the country and a whole lot of transformations.

Not until institutions are fully performing their mandate, reviving the economy will remain a mirage.

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