Zimbabwe would issue a new Zimbabwean dollar that will be pegged to the Rand, according to the policy proposals.
Any Zimbabwean government, ZANU-PF or MDC Alliance, has to contend with the structural problems in the country’s economy, which translate into an extremely weak external position.
The country has shipped out as much as US$30 billion in payments for imports since dollarisation in 2009. This is largely due to low domestic output, as the country is yet to recover from the devastation of commercial agriculture. The adoption of the US dollar in 2009 also rendered local manufacturing uncompetitive and an import deluge inevitable.
A big part of the currency crisis stems from the country’s wide trade deficit. The MDC Alliance projections, under its government, show the trend persisting for another decade.
A marked difference, however, is that an MDC Alliance would rein in expenditure, with the manifesto projecting a balanced budget from 2019 to 2028. Government’s unrestrained expenditure is also a major contributor to the currency crisis.
While ZANU-PF and the MDC Alliance proposals for fixing the currency crisis broadly align, there is a stark contrast in terms of the confidence the populace has in the rival parties’ capacity to deliver on the economy. This is a point Biti frequently makes.
“Modern economies function on the basis of confidence, in Zimbabwe we don’t have trust. If you look at the economic fundamentals up to the election of July 2013, and if you look at the policies which were implemented after the collapse of the GNU, the policies are more or less the same,” Biti said in his October 2017 address.
“I tried to pursue debt relief, Chinamasa tried to pursue debt relief. But the reason which explains why…you cannot find a dollar right now when basically the same policies have been pursued is because nobody trusts ZANU-PF. There’s a trust deficit.”
ZANU-PF, after all, has pulled off the incredible feat of mismanaging the country into two inflation crises within 10 years.
The MDC, on the other hand, is, rightly or wrongly, widely credited with a period of economic growth and stability when it shared power with ZANU-PF between 2009 and 2013.
It is an indictment on ZANU-PF that Somalia, which collapsed in 1991, has somehow sustained a monetary system throughout brutal civil strife and rampant counterfeiting by warlords, while peace-time Zimbabwe has suffered multiple currency crises since 2000.
For any currency reforms to succeed, the public needs to be confident that their money will hold its value.
Another pre-election survey by Afrobarometer found that 42% of respondents thought MDC Alliance leader Chamisa would do a better job at creating employment than ZANU-PF leader, Emmerson Mnangagwa, who had the backing of 32%.
That Chamisa, whose grasp of the economy is passable at best, polls better on the subject than the supposedly pro-business Mnangagwa in the job creation stakes shows how little faith ZANU-PF enjoys.
Confidence is a big part of any currency and would probably help the MDC Alliance along, but the deep structural problems in the economy require much more than sentiment. – NewZwire
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