Deal with currency crisis

HARARE - As we count down on the year 2018, Zimbabweans are seized with a fragile surrogate local currency which is losing value every day.

Prices are also going up and one fears that savings could soon be wiped out once again, as they were during the economic collapse and spectacular hyperinflation that shattered the country’s economy in 2008.

What is particularly disturbing is the contradicting policy path that government is taking which does not really spell out the direction which the country is taking in terms of its own currency.

For instance, Finance minister Mthuli Ncube invoked the Customs and Excise Act last month and imposed duty in foreign currency on an assortment of goods that include vehicles and meat, in line with the 2019 National Budget Statement.

Given previous pronouncements that the United States dollar and the bond note are at par, the 2019 National Budget Statement indicates something else — that the bond note and greenback are actually not equal, with the American unit being the currency of choice.

This, among other things, results in people losing confidence in the bond note, which therefore results in inflation and unacceptable price distortions that are now the order of the day.

Is it not strange for a government to openly refuse its own currency in preference to other foreign currencies when citizens present it as payment for taxes?

Worse still, these are not returning citizens but those who are already resident in Zimbabwe.

While government needs to generate foreign currency to resuscitate ailing industries and fund critical services, it must do so using ways and means that would not inflame the crisis.

This is strange and does not seem to solve the country’s crisis.

What is required is a pragmatic currency reform agenda. While this is certainly an uphill task, there is no other way of doing it other than to confront this huge elephant in the room.

While this may not be achievable overnight and may drag for at least five years to correct the economic and financial imbalances driving the fragilities in our economy, it goes without saying that our top priority must be the currency reform process.

It is also important that our economic policies and investment laws are improved in order to attract investment as another stepping stone towards dealing conclusively with the currency crisis.

Besides debt relief and direct loans, Zimbabwe needs foreign direct investment, which allows for the flow of foreign currency into the country.

Ultimately, investors need confidence in the currency system, which they should be able to rate, exchange and remit to their country of origin.

Investors and Zimbabweans need to know that their money is safe through currency stability and that government is really committed to development, which only comes when there is a standard measure of wealth (Zimbabwean currency) that is acceptable locally and across the borders.

The country cannot survive using this three-tier system that was organically developed and has resulted in exorbitant prices, dislike of the bond note and criminalisation of foreign currency handling on the streets.

Government must therefore deal with the current scenario whereby there is rampant hoarding of goods and long queues at filling stations, which seems unlikely to normalise any time soon.

What we’re seeing is simply a product of speculative behaviour which, in the main, cries out for currency reform.

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Comments (1)

If the info media skirts around the real issues regarding our currency crisis, then they would also be failing to "confront the huge elephant in the room". Would this paper please tell the nation how we got here. The nation needs to know in simple terms how their USD accounts in the banks degenerated to bond notes and RTGS balances that no longer have any value. Get the people who converted our USD accounts to explain how they did that, and to whose benefit. It's quite criminal for anybody to do that, and let those responsible tell the nation what happened and they should also apologise to the nation for such criminal activity. That is what is called "holding the authorities to account". And is the media afraid of doing the nation such favour and service?

Tinzweiwo Tirivanhutose - 10 December 2018

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