As a student of policy making in Africa for nearly 40 years, I have learnt to apply a two-step process when giving policy advice.
One: can I accurately predict the cause-and-effect six steps from the time a policy decision is made? Two: if the answer is yes, then I recommend to implement the policy; but I recommend to revisit the policy measure if the answer is no.
In the last week, I have watched the queues grow inside banks and at ATMs, and then they vanished by the ATMs – they had ran out of cash and everyone who needed cash in Harare has had to either join long queues inside the banks or resort to a few emerging informal means.
This has taken me back to 2006-08 during the hyper-inflationary days in Zimbabwe – and the citizens seem to be falling back into the very Zimbabwean strategy of “making a plan”.
It is always difficult to prepare for the future by looking in the rear view mirror to predict tomorrow; but as we are in unchartered waters, I have only the past to help me read the crystal ball on the future evolution of the Zimbabwe economy.
On 4 May 2016, the Governor of the Reserve Bank of Zimbabwe (RBZ) in a press conference announced a set of measures meant to address emerging economic problems in the multi-currency monetary system (nearly 100% dominated by the US$) in Zimbabwe.
Two days earlier, the International Monetary Fund (IMF) in Washington DC had just completed a Board meeting where the decision was made to continue the constructive engagement that has been under way for over six years towards a debt clearance program.
In spite of the usually close collaboration between IMF and central banks, the decision of May 4 was apparently not communicated to the IMF (a bad strategy when trying to maintain trust between “partners in development”).
After the hyperinflation period that ended in 2008 and Zimbabwe abandoned the Z$, confidence in the banking system (including the RBZ) was the major casualty. Since February 2009, a major conversation guaranteed to leave Zimbabweans terrified about their economic future has been any discussion of re-introducing the Z$; and Government has consistently reassured the population that the Z$ will only return when the economy is sufficiently recovered and confidence restored.
So when the RBZ governor on 4 May 2016 promised to introduce bond notes (backed by a loan of US$200 million) and reassured the citizens that a bond would be at par with the US$, nervousness gripped the market.
Continued next page: