Friday 5 April 2024


 Dr John Mushayavanhu’s policy-engaging maiden RBZ’s bold, robust and positive Monetary Policy Statement [MPS] delivered today has justified its delay.

The MPS is based on the correct policy assumptions and the correct factual background analysis; and the ZiG, as a structured gold backed currency, is indeed the correct financial remedy with the best chance of getting Zimbabwe out of the quagmire of the currency-trap that it put itself in 2009 when it ill-advisedly dollarized its economy under the guise of adopting a multi-currency system.

But, and this is a very big but, the ZiG remedy will work and break the country's 15-year old currency jinx only and only if – come rain or shine – the monetary authorities and the government ensure by all means available and necessary that they scrupulously keep at least the following two fundamental policy decisions in the MPS delivered today:

1. “The auction system has been replaced by a refined interbank foreign exchange market under a willing-buyer-willing-seller (WBWS) trading arrangement. Following this development, a transparent price discovery mechanism is now in place in the interbank market. The Bank will continue to provide trading liquidity to the market using the 25% surrender proceeds from exports”; [paragraph 147, page 63 of the MPS].

2. “ZiG shall at all times be anchored and fully backed by a composite basket of reserves comprising foreign currency and precious metals (mainly gold), received by the Reserve Bank as part of in-kind royalties and kept in the vaults of the Bank. Foreign currency balances will be accumulated through market purchases from the 25% surrender requirements as well as sale of some precious metals received as royalties”; [paragraph 161, page 66 of the MPS].

While it is never easy for government in general and anywhere, and it will therefore not be easy for the Government of Zimbabwe in this case; not least because of the seductive temptation of quantitative easing; the authorities must nevertheless religiously and ruthlessly ensure that they observe, defend and keep the above two policy decisions at all times.

Doing so will most certainly win the government and the state the much needed public confidence in the economy and society; which public confidence has been eroded by the trust deficit that clearly exists between government and the public.

The simple yet hitherto imponderable fact is that Zimbabwe must come to terms with the fact that dollarization in 2009 cursed the Zimbabwean economy.

When the Zambian kwacha and the Mozambican metical were respectively battered, back in the day, in more brutal ways than the Zimbabwean dollar was in 2008; the authorities in Zambia and Mozambique stayed the course and kept the faith in their national currencies.

In Zimbabwe, there was panic in 2009, and the cardinal sin of dollarizing the economy was then committed, cluelessly. The rest is history, but a very painful history.

The measures announced in today’s MPS have the possibility and capacity to get Zimbabwe out of the currency curse of dollarization. The measures mark a major first, it is critical to take the rest of the steps; going forward.

All what is needed is to keep the will behind the policy thrust of the MPS delivered today, and for that will to pave the way for the successful implementation of the MPS! He was writing on X


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