The compromised position Zimbabwe found itself in would always mean there would be some damage — though it will presage a revival.
With a weaker currency, exports will gain in competitiveness, bringing much-needed foreign exchange to counteract the inflationary pressures the nation is currently experiencing.
There is also an imperative to develop a market for Treasury bills and long-dated bonds and create a yield curve. A monetary policy committee will be appointed soon to buttress monetary policy conduct.
The Zimbabwe dollar, comprising RTGS and bond notes, is now the designated sole legal tender in Zimbabwe — pending the rollout of a fiat currency later in the year.
Initially, the government introduced it alongside the other currencies, with the intention of it becoming the main currency of exchange in place of the dollar, which would primarily be used as a reserve of value.
The theory was not borne out in reality. Every day, the RTGS was shedding one percent of its value against the dollar, hampering its transition to the primary currency of domestic exchange.
Change had to be driven more forcefully: it was clear the RTGS had to be designated the sole legal tender.
Admittedly, the government did not manage this without fault. The implementation was too indiscriminate, with international and export facing companies under its purview, causing disruption to the flow of business.
The government has recognised this was wrong and rectified it. International facing companies can again trade in foreign exchange. Only to carry out transactions in the domestic market they must first convert into RTGS dollars.
For the moment, it is causing some economic turbulence — something no serious government would wish to be the result of their policy. But this was always to be expected.
There is no way to fully avoid it. And a commitment to better their citizen’s future requires the same government to make sometimes difficult choices.
Zimbabwe was once the exporting breadbasket of Africa. Now, its balance of payments is negative. But with control of our currency, we can reclaim the best parts of our past — and resume our place in the world economy as an export-led nation in the near future.
By Mthuli Ncube from The Financial Times
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