In addition to these significant achievements – all of which are recognised by the IMF, we have completely revamped the way in which we are funding Agriculture. Command Agriculture was costing us billions every year and declining in effectiveness and production – it was clearly unsustainable. What is now in place is much more accountable and targeted and will be used this winter to grow the winter irrigated crops. The new systems will then be geared up to handle the much larger summer cropping program. All we now need is to provide greater security for farmers and it is a national calamity that so little progress is being made in this area.
We have formalised the use of the RTGS dollar and our paper currency and today over 90 per cent of all transactions are made in these currencies in domestic markets. The talk of re-dollarisation is simply a lack of understanding, we are de-dollarising our economy but recognising this will take years, not months. We have to re-establish confidence in our own currency and our ability to protect and maintain its real value. So long as people think it is not a safe vehicle for savings, people will retreat to the US dollar as a store of value – just like gold in previous centuries.
The reality is that there is much more US dollar cash in our economy than our own currency. We are trying to remedy that but it takes nearly a year to get a new currency designed and printed and put into circulation. In the meantime, the existing currency actually trades at a 30 per cent premium in local markets over the RTGS dollar.
It is even widely traded in neighbouring States. So the State has decided to slow down the process of de-dollarisation and to allow people to use their own foreign funds on the domestic market. This will tap into the very considerable volume of hard currency that is being traded in the informal economy and assist us in meeting demand for essential imports.
On the exchange rate side, we are working to create a proper formal market for hard currencies but this has proved more difficult as the existing systems are so entrenched. Our Banks have not operated in these markets for many decades and will have to adjust to a market driven, open and competitive system that will be much more challenging to manage.
But gradually it is happening and the fundamentals, as I keep on saying, are sound and do not justify present informal sector levels of 25 to 30 to one. We have a balanced trade account – we are now earning enough hard currency to meet all our needs for imports.
We have now liberalised the current account and you can import what you want, all you have to do is find the local currency to buy the foreign currency to do so. The next step is to make sure you do not have to go to a dealer or trader and make private deals. You will eventually be able to go to your bank and ask them to buy foreign currency for you and then credit your own Foreign Currency Accounts.
The Government has clearly pledged that they will never again allow these private accounts to be raided. Even so many do not trust the new authorities, it will take time to rebuild confidence. I have both types of account with my own bank and for the first time I can travel abroad and pay for everything I need with a card. I have been in business for 60 years and have never been able to do that.
But we cannot make real progress until we all believe that these changes are real and will not be reversed. Only then will we start to behave differently and invest in our own future.
Eddie Cross
Harare, 27th February 2020
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