Published by the government of Zimbabwe
3 November 2008
editorial
The Reserve Bank of Zimbabwe faces some tricky decisions this week; cash withdrawal limits clearly have to be raised, but the questions are by how much and how often.
The digital money supply now appears to be beyond much control by the Reserve Bank or anyone else; the creation of new money to pay essential State bills must be significantly less than the expansion of money supply coming from the equity markets and the arbitraging between exchange rates that seems to dominate the "dealer" economy.
In a sense, the growth in "digital" money supply is now dominated by market transactions rather than by central bank fiat and that means that control over that "digital" money supply has been lost by everyone, including the authorities.
The tighter control of cash prices, arising from the fact that the RBZ does have total control over how much cash is in circulation, has benefited the lower paid groups, which now include what used to be referred to as the middle classes, or anyone else whose monthly salary is less than the minimum deposit into an equity unit trust.
For many people the amount of money that can be withdrawn in cash each month by an individual is their monthly pay. You need thousands of times more than that sum to buy much extra from a shop with a card, or invest on the stock exchange, or play the foreign currency markets at cheque rates.
In October the difference in prices between cash and cheques meant that a person would need billions of dollars to double the standard of living given by an income of around $2 million a month.
So when setting the limits, the RBZ needs to consider what a family needs to survive. The $50 000 set a few weeks ago is now obviously totally inadequate; it should have been raised at least a week ago and probably raised a bit earlier still.
But increasing the amount of cash in circulation will raise prices unless there is an increase in the amount of goods available, something unlikely at the moment.
That has to be accepted, although pressure from the authorities can possibly slow the rise in prices.
So probably the only way to keep this somewhat weird survival strategy going is to raise the daily cash withdrawal limit moderately and fairly frequently. The figure could easily be set at $500 000 this week with greater limits set later in the month.
In a sense, the RBZ has to look at the cost of essential basic food and things like viable bus fares, and set the cash withdrawal limits accordingly.
The vast gap between cash and card prices does mean that money is starting to be destroyed, by the very market forces that caused some of the problems is the first place, but that does not mean ordinary people should be refused the right to buy essential food and services.
The whole problem of accelerating hyper-inflation puts ever more pressure on the politicians to reach a political agreement, so that a nationally accepted strategy can be put in place and rigorously implemented to bring inflation under control.
We hope we can see a viable cash limit this week, and then more regular increases to keep pace with inflation during the month.
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what tricky or rational decisions has the RBZ done? Why should they worry about decisions? Chibhubhubhu chega chega
Here's the crux of it. Mugabe, through the RBZ, gets a cut on every single transaction in Zimbabwe. That's why the whole country is going down the toilet.
Neither farmers, nor miners can sell their products to anyone but the government, at government prices. Then Mugabe sells the products abroad for foreign exchange and pockets the difference.
The RBZ forces anyone who uses a bank to submit to the same scheme. Money goes in at one rate, and comes out at another lower rate. The difference is skimmed off to pay for the plasma TVs and foreign cars given to anyone, such as judges and legislators, whose loyalty has to be bought.
It's a devious plan that's actually worked for a very long time. It's like the mafia, but it's all legal in Mugabe World because he wrote the laws making it so.
Except now they've gotten too greedy, and started stealing money from foreign aid organizations. And that may just be the straw that broke the camel's back, because multi-national organizations demand transparency in order to operate multi-nationally; so that everyone trusts each other. And Mugabe and Gono's scheme only works when it's not examined too closely in the light of day. Let's see their lame excuses when they can't cover the losses.
Here's an idea for RBZ - Stop stealing foreign currency from foreign NGO's!
http://www.iht.com/articles/2008/11/03/africa/zim.php
Money deposited by foreign NGO's w/ the RBZ is now suddenly "unavailable"?
It's bad enough for ZANU-PF/Mugabe to rape and pillage the people of Zimbabwe, but now to steal from the people trying to feed the starving masses?
Is there no depth to which ZANU-PF/Mugabe not stoop to clutch at power? My guess is no.......