Since the publication of the first article entitled “ Zimbabwe dollar suspension unhelpful” I have received interesting and amusing comments about the subject . The purpose of the article was not to criticize any body or support any particular group. The idea is to freely share ideas and thoughts on how the Zimbabwe Economy can recover under very difficult credit and financial market conditions. The much anticipated aid or financial assistance from either SADC or the Western nations is unlikely to come. If it comes it will be highly unlikely that Zimbabwe will get adequate amounts . Therefore it is imperative for Zimbabwe to be pro-active and not over expect others to bank roll the recovery programme.
It is clear some wings had to be clipped with regards to the Quasi Fiscal Activities and currency management. Especially on those who had privatized currency printing and converted it into a hobby meant to fill up their petty cash boxes at the expense of the national currency .The source of Zimbabwe’s inflation has been certified as the excessive printing of the Zimbabwe dollar. That lesson has been learnt and systems and measures should have been developed to protect the national currency from such sabotage and irresponsible behavior by those entrusted to safe guard the national currency .
If the intention of the GNU was to serve the people, then it will be very hard to serve the people without the use of a local currency to assist in facilitating trade and normal functions of a Government .
At this stage its advisable for the GNU to do a quick policy shift and re-introduce the Zimbabwe dollar at least enough to pay for some of the basic government needs. This currency will then circulate alongside the other major currencies .There are various critical services which directly do not require the use of foreign currency .The GNU quickly needs to come up with some funds or else it will soon fail to deliver and all participants will have to share some blame of failure and non-deliverance .
The removal of the local currency means Zimbabwe has no monetary policy of its own .This in turn impacts the GNU’s ability to fund its operations .One of the key requirements of the Public Finance system is the ability of the Government to borrow and raise funds including by reasonably printing its own money. The key here is to ensure that printing currency is not converted into a private self enrichment venture. If the GNU is a Government in any form or sense of the word then it should surely have capacity to monitor and restrain wild currency printing. Failure to do that clearly points to a view that Zimbabwe does not currently have a properly constituted Government .
The suspension of the Zimbabwe dollar was Politically correct but economically hard to justify in a situation where the Government finds itself starved of lines of credit and any balance of payment support . It was politically correct sending a clear signal that Zimbabwe had a new Sheriff and things would be done differently. And this message has been heard , now the second phase is the Sheriff would need some tools to deliver real change. One of those tools required is the Zimbabwe dollar.
There was a run on the Zimbabwe dollar very similar to a run that can affect a bank in terms of people losing confidence in a bank or banking system. This loss of confidence didn’t happen overnite.It was a long drawn out process over a relatively long period .This is the path which the re-building of the confidence in the currency will take or should take. There cant be a sudden return of confidence in the Zimbabwe dollar but that journey has to start somewhere.
At the agreement of the implementation of the Government of National Unity signified by the swearing in of the GNU cabinet and the Prime Minister that’s when a new Zimbabwe dollar should have been immediately introduced under the new “ sheriff” .Obviously that currency would have still remained weak and under pressure due to lack of exports and balance of payment support .How ever the same new currency would have been more stable than the previous one if the new team refrained from excessive currency printing unmatched by any productivity.
After the swearing in of the new Government it appears there was a huge mis-calculation that the International Community will pour in huge amounts of Money and the new Government would slowly find its feet whilst being on life support from the international community.
This miscalculation would still have resulted in limited benefits in the lack of a local currency. A simple analysis of currency valuations, appreciation and depreciation shows that it would have been a better option to have a very weak currency (as opposed to suspended) in circulation ahead of any injection of international community funds. An injection would have somehow helped to stabilize and possibly prop up the weak currency. But the total lack of that currency due to the currency suspension means
A currency measures confidence in the Economy and in government policies. The lack of a local currency eliminates that vital measurement tool which is required as a form of remote assessment of how the GNU is performing.
It is unfortunate that any idea that doesn’t seem to support some GNU policies is somehow dimly viewed. Zimbabwe is in its current form due to certain know it all individuals who refused to listen to divergent views. This was all done in the name of the people ,patriotism and sanctions busting. As Zimbabwe seeks to rebuild and re-brand there is need for a proper inclusive approach and increased tolerance on divergent views when it comes to policy formulation. As things currently stands the GNU needs to urgently re-introduce the Zimbabwe dollar and retain some semblance of being seen to try and deliver service to the Zimbabwean people.
Gilbert Muponda is an Entrepreneur based in Canada. He is CEO and Co-Founder of 3MG MEDIA Limited. He can be reached at;
Email: gilbert@gilbertmuponda.com Skype ID: gilbert.Muponda
Twitter ; http://twitter.com/gmricapital
Phone: 1-416-841-5542
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