Whip on the ZimDollar!
Zimbabwe has experienced quite a chunk of macro-economic problems. The ZimDollar has had the most of the beating in multiple re-introductions and rejections. Macro-economic problems are not something new. Every nation under the sun has at least one of these challenges; unemployment, unbalanced payment statuses, inflation and many more.
State of the economy
It is unfortunate for a country like Zimbabwe, fighting other problems from sanctions to closure of production industry to be going through this. Currency depreciation, yes currency depreciation, it has caused severe price increases in almost all commodities in the market. It has shown no mercy on essential utility bills which have increased beyond imaginable margins. The swing in the plot has left the government to reconcile economic growth with price stability.
The Zimbabwean currency has been increasingly falling in value in its price against its major competitor the US dollar. This problem is not a surprise to anyone as it was imminent. Economists know for a fact that; for any currency to work in any market, certain measures and policies need to be put in place first before it is introduced. The most common are:
- Good governance policies.
- Good financial policies.
- Supporting the currency.
- High levels of confidence in the currency.
- Support structures and rebates for affected people.
It goes without saying that Zimbabwe has not been adequately meeting these given requirements.
There have been multiple inconsistencies in the Zimbabwean monetary policy. The great hyperinflation in Zimbabwe in the year 2007/2008, led many Zimbabweans to become the world’s poorest trillionaires. A monetary policy was then put in place in 2009 which introduced the use of multi-currencies. However, in the end, we ended up using only the US dollar as it was readily available. In the basket of currencies, there was the Indian Rupee which most people can agree with me on its unavailability. All prices were in US dollar. A very few, close to none companies paid their workers in the Chinese Yuan and yet it was a currency which we were supposed to use. Seriously policy enforcement was poor. The overuse of the US- Dollar crippled all Zimbabweans. Most got too dependant on and loved the green paper more than anything else.
The US-dollar started to vanish from the market. In turn,this then led to the sneaky re-introduction of the ZimDollar in the form of bond notes. At first, the bond note worked quite well in the market. It kicked off at a prestigious fixed exchange rate of 1:1 against the US dollar through. However, this did not last for long as it lacked fundamental sustaining logic. As a result, the Bond started to depreciate and the market began to trade with the US- Dollar . This introduced a three-tier pricing system; the US Dollar price, Bond Note price and Eco-cash/swipe price.
The Zimbabwean dollar was formally brought back under the re-dollarisation programme. The government then made it illegal to conduct domestic trade in foreign currency. Funny enough, few months down the line, use of foreign currency in the form of free funds was permitted again. The Central bank pegged the US/ZIM dollar rate at 1:25, which is the current normal prevailing rate. All these inconsistencies diminish the value of a currency to the extent of reaching 1:70 as of recent. Indeed it was a “permanent solusheni” ha ha ha.
Zimbabweans also have self-hate against their country. Willingly people just don’t prefer the Zim dollar which has led to its further depreciation. Illegal, unscrupulous traders who we know as money changers have been working day in and out. Their activities are largely contributing to the destruction of the economy. The rates they trade the Bond note for are draining confidence in the ZimDollar.
Ultimately, the ZimDollar has no public confidence. People willingly dislike their currency, yet this is one major cause of this heavyweight macro-economic problem. As a result of the introduction of the new notes $ZW10 and $ZW20, rates have since been flying higher in the parallel markets. This is not healthy if we are to have a functional economy.
What I recommend
Therefore, there is a serious need for consistency in currency policies. No country has ever de-dollarized so easily. It takes great commitment by all stakeholders for our currency to work out well. This may be the only way we can curb price hikes. Increasing salaries to match inflation is not a solution. We’d rather keep prices on halt than compete with black market rate. Harshly, this is only possible when our beloved ZimDollar is working well.
Zimbabweans should shun self-hate, have confidence in the currency and government policies. That way we will achieve greater yield in bringing stability to the ZimDollar.
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