Zimbabwe's government has a trust problem as it introduces
a discounted currency in a bid to reverse chronic cash shortages that left
people struggling to get hold of basic goods.
Business people and economists welcomed last week's
decision to abandon an unrealistic dollar peg for the country's surrogate bond
notes and electronic dollars, which were merged into a new currency called the
Real Time Gross Settlement (RTGS) dollar.
But they expressed doubts about whether the government has
the fiscal and monetary discipline to stick to its commitment to lower the
budget deficit and keep inflation in check.
"There is nothing to stop Zimbabwe printing money with
this new currency," said Jee-A van der Linde, an analyst at South
Africa-based NKC African Economics. "The government has basically kicked
the can down the road in recent years by trying to stimulate the economy
through excessive spending."
Zimbabwe's currency woes have undermined President Emmerson
Mnangagwa's efforts to win back foreign investors who were sidelined under his
ousted predecessor, Robert Mugabe.
The last time Zimbabwe had its own currency, a decade ago,
Mugabe's government was able to turn on the printing presses to fund higher
salaries for government workers, curry favour with the military and pay
political opponents - with disastrous economic consequences.
Residents of the capital, Harare, now wait outside banks
for hours to withdraw a maximum of around $30 in surrogate money or collect
remittances from relatives abroad. Snaking queues have become the norm at
petrol stations because of a shortage of fuel.
Finance Minister Mthuli Ncube last week pledged to contain
public spending and reiterated the importance of the independence of the
central bank. Yet, investors and Zimbabweans remain concerned that, should
Mnangagwa's government come under political or military pressure, it may revert
to the tricks of the past.
Some also fear that the Reserve Bank of Zimbabwe (RBZ), the
country's central bank, will be unwilling to loosen its grip over the currency
as its governor, John Mangudya, is thought to oppose the move to abandon the
dollar peg.
"It's quite clear that the minister of finance wants a
liberalised currency regime, whereas the governor of the Reserve Bank
doesn't," said Eddie Cross, a Zimbabwean economist and former opposition
lawmaker.
Whether Zimbabwean policymakers can convince their
doubters, both in financial markets and on the streets, will be central to the
success or failure of the new RTGS dollar.
If Zimbabweans begin to use banks instead of the black
market to exchange any U.S. banknotes they have stashed under their mattresses,
then the government could start to rebuild its foreign currency reserves by
buying those dollars from banks.
There was anxiety among Zimbabweans on Tuesday, with speculation
rife that the central bank governor, Dr John Mangudya, would on Wednesday
present ...
That could give it the wherewithal to relaunch the
Zimbabwean dollar when the economy has turned a corner.
Zimbabwe ditched its own currency for the U.S. dollar and
other currencies in 2009, after hyperinflation reached 500 billion percent the
previous year.
But as a chronic hard currency shortage worsened, it
introduced a parallel system of bond notes and electronic dollars, nicknamed
"zollars." The substitute currencies were pegged at 1:1 to the U.S.
dollar but traded at a discount on the black market.
A key test for the RTGS dollar comes on Monday, when many
Zimbabwean banks will buy and sell RTGS dollars on the interbank market for the
first time. Some large firms will also be able to buy foreign currency from
banks, but it is not clear how much or on what terms.
Many Zimbabweans are sceptical that the latest monetary
intervention will reverse the crisis.
"The government has changed things over and over
again," said Godfrey Chinani, who is worried that customers will no longer
be able to afford the car parts he sells from a cramped shop in downtown
Harare.
He wishes Zimbabwe had switched to the rand instead, as he
buys his goods mainly from South Africa.
"People get RTGS as salaries, but when you convert it
to rand or U.S. dollars it is worth nothing," he said. "It won't
work."
The central bank sold U.S. dollars to a handful of banks at
around 2.5 RTGS dollars on Friday, an effective devaluation of 60 percent. More
than $5 million changed hands on the interbank market, a senior RBZ official
told The Standard newspaper.
In the coming weeks, the new currency is expected to weaken
towards 3.5 to the dollar, the level at which bond notes have been trading on
the black market.
Many Zimbabweans fear a return to the hyperinflation era
that prevailed during part of Mugabe's tenure if the RTGS dollar sinks much
beyond that point. Inflation already hit a 10-year high of 57 percent in
January, and some public servants say the currency devaluation means the
government should raise their salaries by several times.
Authorities have pledged to control the currency's slide as
part of a "managed float," but how they intend to do that remains a
mystery. Times
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