Then the Deputy Minister of Finance came out and said we have to move towards dedollarisation. Anything else is suicide for our productive economy. But everything they are doing is the very opposite of what is actually needed. I simply do not see how any sane Government can take away from its exporters 25 per cent of their gross earnings and pay for it with pieces of paper called Treasury Bills with a totally artificial face value at 6 per cent interest over 2 years. How do you expect anyone to survive?
They are doing this so that they can claim they are not printing money. Of course they are, all they are doing is differing payment in the new paper currency. They are printing money to pay the Civil Service and some suppliers in local currency and the evidence of this is the very fact that in the past 5 months, the formal economy has gone from 85 per cent in USD transactions to 25 per cent. All formal sector firms are holding huge balances in ZIG and in a desperate attempt to prevent these balances going into the market to buy hard currency at any price, they increased the percentage of all bank balances that had to be held in the Reserve Bank.
None of this makes any difference to the future of the ZIG. The word on the street is that it is worthless. Can we really disagree?
When our Reserve Bank was printing Nostro dollars back in the period from 2014 to 2018, we ended up in 2019 with US$23 billion in our bank accounts. At that time, we did not even have a name for it – that came later when our new Minister of Finance said that those dollars, were not real, they were RTGS (Real Time Gross Settlement dollars). I was a Member of the MPS at that time and I said in a RBZ Meeting, that if I took 1000 ‘dollars’ down to the tellers on the ground floor and was given US$1000 in exchange, that in 15 minutes the news would spread, and we would have a queue outside the building kilometres long.
When finally, the new Minister ordered that our accounts be differentiated into real US$ balances and RTGS dollar balances, we had a short period of stability and then the latter crashed and in 8 months our RTGS balances were down to 15 per cent of their former value, by inflation. God help us if we start printing Nostro dollars again, but the ZIG is a totally different matter. I have seen references to the ZIG as a ‘gold backed currency’. That is of course complete nonsense. The Governors reference to ‘sufficient reserves’ to protect the currency is also nonsense.
The ONLY test of a currency is its convertibility on demand. Surely any street kid knows that. It’s a piece of paper with printing on it and if you can read English, it says it has a value which is printed on its face. It also has security features so that it is difficult (but not impossible) to counterfeit. However, the only test which it has to meet to be of any value is its convertibility on demand. Fail that test and it is dead. I remember Gono’s 100 trillion-dollar notes, lying on the street and people walking over the stuff in 2008.
So how to get there. Its not a question of resources, we are swimming in US dollars. It’s not a question of the macroeconomic fundamentals – we are not printing money to cover a fiscal deficit. It’s just how to make the local currency freely convertible into a currency with which we can trade.
The biggest threat of the present set of policies is that we are again feeding Government with hard earned foreign currency at undervalued exchange rates. Remember Dr Gono handing out tractors and luxury cars to everyone. Today the ‘Father Christmas’ in Government is the Secretary for Finance, a very comfortable position to be in and very powerful. But completely wrong.
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