Published by the government of Zimbabwe
Tichaona Zindoga
22 August 2009
analysis
Harare — One thing shown by the interest elicited by the prospect of the reintroduction of the Zimbabwe dollar, which has been "dead" for about half a year now after suffering the vagaries of sanctions-induced hyperinflation, is that the issue of our national currency is more than a simple economic phenomenon.
Early this year, the Government introduced the multi-currency system in which transactions can now be carried out using the United States dollar, the South African rand and the Botswana pula.
The move was aimed at bringing macroeconomic stability and to tame inflation that had literally swept all but Hungary's 1946 mammoth record that ran into billions.
Zimbabwe's hyperinflation was caused by a number of factors spawned by the illegal economic sanctions, chief among them the flight of capital and under-performance of industry.
Although the introduction of the multi-currency system has been credited with the prevailing macroeconomic stability, availability of commodities and a general sense of relief to business and ordinary Zimbabweans who have had a reprieve from the torrid inflation roller coaster, the issue of the Zimbabwe dollar has never been put to bed.
Reserve Bank of Zimbabwe Governor, Dr Gideon Gono who has identified inflation as the country's number one enemy and fought to give the national currency a semblance of value, has generated intense debate after he recently called for the reintroduction of local unit.
In a presentation he made in Parliament this week, Dr Gono proposed that the new currency be backed by gold or diamond production in the country, so that it has actual value, as one could have a measure of gold in exchange for money.
The reintroduction of the Zimbabwe dollar, he said, was therefore "not a blind return to the money printing press."
Dr Gono argued that on top of easing the liquidity crunch that Zimbabwe is currently facing, as there is so little money in circulation even when there are plenty of goods to buy, the Zimdollar would avert the current unavailability of smaller denominations of currency.
As a matter of fact, the Reserve Bank chief has published "In defence of the Zim dollar" articles in the local Press detailing how and why the local unit should bounce back.
But the responses that his sentiments have courted indicate that the Zimbabwe dollar is surrounded by more generic and perhaps complex issues and associations than can meet the eye.
For the ordinary man on the street, the return of the Zimbabwe is a virtual return to the era of uncertainty, long bank queues and incessant price hikes.
These are the people the bulk of whose time was spent queuing for cash and food, as all became scarce as hyperinflation -- which also eroded their savings, pensions and salaries -- and bit deeper and deeper everyday.
They are the same people whose sextillions of dollars became manure after sanity prevailed to staunch the growing number of "rich" people who had benefited from "burning" money.
And for better or worse, these are the people that have had little qualms with seeing the back of the Zimbabwe dollar which they associated with economic turmoil.
Finance Minister Tendai Biti captured this view, which many people could be said to have embraced out of the innocent need for convenience, when he presented the revised 2009 budget in June.
Said Biti: "The death of the (Zimbabwe) dollar is a reality that we have to live with.
"Since October 2008 our national currency has become moribund."
The multi-currency measure was introduced early this year in the budget that then Acting Finance Minister Patrick Chinamasa used to propose US$100 allowances for civil servants.
The civil service would still continue to receive salaries denominated in the local unit.
Right now only commuter omnibuses plying certain routes in the city are accepting the Zimbabwe dollar, only in $50 billion denominations.
Even then, the local unit has become mere loose change tokens not any useful beyond the mutual understanding between the operators and the commuters, and one does not have to count whether or not the notes add up to the tentative $3 trillion which is said to be the equivalent of five rand.
Some analysts have concluded that Dr Gono is "out of touch with reality" to wish to reintroduce the Zimbabwean currency.
But the stark difference in the conjectural positions of Dr Gono and Finance Minister Tendai Biti on the return of Zim dollar highlights something fundamentally more significant than the so-called "turf wars" between them.
This is not even in Dr Gono's noting, in apparent reference to Biti, that "some among ourselves celebrated the death of the Zimbabwean dollar".
While the central bank chief was campaigning for the local unit and that "we should not pin our hopes on Messiahs from elsewhere beyond our borders," but to redeem our own situation, Biti was reportedly considering joining the rand union of South Africa, Swaziland, Lesotho and Namibia, a development that would effectively render Dr Gono redundant.
Biti has been on record as saying that he would quit the inclusive Government if he was forced to resuscitate the Zimbabwe dollar "because he is determined that his policies are not disturbed".
"The most important thing is that the Zimbabwe dollar is not coming back," a local weekly quoted him as saying last month.
"If I have to bring the Zimbabwe dollar back into circulation, I will go back to my law firm at 200 Herbert Chitepo."
Economic Planning and Development Minister Elton Mangoma who declared that the dollar had "died a natural death" and that there was "no argument on that" shares Biti's views.
"The Zimbabwe dollar is not coming back," he said last month.
On the idea of randifying, Dr Gono has warned that such a move is likely to impact negatively on Zimbabwe.
"If we are to randify, we will have to be members of the Common Union with Namibia, Lesotho and Swaziland whose economies are anchored with South Africa.
"All our policies would have to be submitted to South Africa for concurrence before we finally pronounce them," he said.
South Africa has already indicated that it is willing to let Zimbabwe adopt the rand as the official currency.
President Mugabe, however, feels Zimbabwe should have its own currency and is on record urging the reintroduction of the local unit, with some protection, as it enabled people to access money for various transactions.
Some people, especially in the rural areas, have now been forced to barter their commodities because of the shortage of cash.
Dr Gono has said adopting the rand will be surrendering monetary sovereignty.
The move will also inevitably entail the South African government setting conditions on loans extended to Zimbabwe and all but controlling Zimbabwe's fiscal and monetary behaviour.
In addition, Zimbabwe's gold and exchange control transactions will have to be synchronised with the policies adopted for the management of the rand union.
However, Zimbabwe could benefit from easier access to the South African capital and money markets and a right to enter into bilateral agreements with South Africa, with the South African Reserve Bank availing temporary central banking facilities.
Problems with small-denominated currency could be alleviated as Zimbabwe can request South African authorities to supply such smaller denominations of currency.
Yet the issue of sovereignty, in this case monetary sovereignty, brings a rather interesting dimension to the whole issue of the reintroduction of the Zimbabwe dollar.
In fact, as foregoing reveals it produces a more or less predictable pairing, Dr Gono and President Mugabe on one side and Ministers Biti and Mangoma on the other.
The former are speaking the language of national and monetary sovereignty while the latter perhaps think it is a language as "dead" as Latin.
Which rather raises stakes in the adoption of the South African rand, or any other currency for that matter.
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Yes, so utterly destroyed that they admit it will take 50+ years to get back to where they were 15-20 years ago. Zimbabwe does not have to sacrifice its monetary policy if it adopts the Rand. Look at Europe! The Franc, Deutchmark, Lira, Szloty and others have all been replaced by the Euro. They have broken down trade barriers and saved billions in tariffs, duties and conversion fees.
Muggy and Gono have destroyed the economy and with it the Zim dollar which makes the Central bank irrevalent and also makes them irrevalent all they have left is their Zanugoons which they pay by giving them a license to steal from hard working people