The reintroduction of our own currency – the RTGS dollar was successful and brought about a rapid recovery of our productive sector – industry and agriculture. We were at long last creating jobs and the economy began to grow rapidly. Exports also began to grow and we found ourselves with an increasing surplus of hard currency – reflected by savings of about US$100 million a month.
However, all was not well. Elements of the old economy and administration did not like the idea of a free economy with open competition. The Reserve Bank retained some elements of the role it played as almost a shadow government under Mugabe and resumed printing money to pay for what they were doing.
The IMF was watching from the sidelines and repeatedly stated that we need alignment between the Reserve Bank and the Treasury and that money supply had to be curtailed. They were ignored.
The result, our new local currency is again floundering. It has lost most of its value and the paper notes printed in the early days are just scrap paper. Instead of the new currency taking over on the street, we have again dollarised.
I would suspect that 85 percent of all transactions on the street are now in USD and over 80 percent of bank balances are also in USD. Our local industries are no longer competitive and the formal sector is shrinking and with it, our ability to tax our economy to meet needs.
Instead of adopting a conventional and standard basis on which our hard currency earning should be traded, we have manipulated the auction, which is now part of the problem, virtually destroyed our own currency, increased imports and smuggling and are allowing all sorts of financial shenanigans to operate freely (like money laundering).
Now we have introduced gold coins and worst of all, the new gold backed ZIG token. All counter productive and simply making things worse.
What is the solution? Our main problem is confidence in our authorities and our own currency. We have got to get back to a mono currency economy which uses our own currency. All foreign exchange coming into the country must be sold on arrival on a bank managed market which produces an exchange rate every hour of the day. Our Reserve Bank should be buying surplus currency off the market to keep the rate down and holding these balances as national reserves. Anyone needing foreign exchange for any purpose should be able to buy it from their Banks. That is how the rest of the world does it without exception. Exchange control should be scrapped, it has no role to play.
If we did that this would be a different country in 24 hours, just as it was in February 2009.
By Eddie Cross
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This post was last modified on October 22, 2023 9:12 pm
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Write a comment * I have very little respect for your 'Mpondo' nostalgia which leaves the subtleties and peculiarities economic situation largely unstated. You seem to be in denial about how the systemic shadows of intergenerational geopolitics continue to shade our circumstances. You sadly still believe that a floated currency is best because the 'market' is apolitical, no, anti-political. You need to cure yourself of positivist delusions, sir.