Tuesday 2 April 2024


ECONOMISTS have issued a vote of no confidence on the proposed structured currency expected to be announced this week together with the long overdue Monetary Policy Statement, amid deepening economic problems and macro-economic instability characterised by currency volatility and surging inflation.

Ahead of the announcement the Zimdollar (ZWL$) has each day since the beginning of the year rapidly weakened against the United States dollar and is currently trading at 1:21 00 in supermarkets and 1:32 000 on the parallel market.

Such a loss of purchasing power has historically prompted the central bank to intervene and arrest the slide, and this time around has been working on a new currency regime potentially backed by gold.

To serve the Zimdollar from returning to the morgue where it was reincarnated in February 2019, government is, therefore, proposing the structured currency: A hotchpotch of fiat money (a government-issued currency that is not backed by a commodity such as gold) and commodity-backed money (a type of currency guaranteed by a physical commodity, such as gold or silver).

According to Invetopedia, fiat money, which is largely modern paper currency, “gives central banks greater control over the economy because they can control how much money is printed”.

Economists have, however, since predicted that the new currency will simply not work as attested to by the failure of the 2006-2009 hyperinflation-era bearer cheque, the 2016-2018 bond note and the later ZiG just to mention a few.

“Zimbabwe should not continue with this approach of experimenting with ideas before a serious dialogue on the underlying factors, which will not just disappear. Issues of trust and confidence require serious social dialogue between various stakeholders,” academic Godfrey Kanyenze said.

He added: “The fact that the authorities have branded various proposals that have not really worked, including ZiG, should provide ample warning signs that there are deeper issues that require consensus building on the best foot forward. This cannot be done by government alone.”

Economist Vince Musewe said there was nothing in economics called structured currency.

“Rather government is effectively trying to prop up the value perception of the ZWL$ by deriving that value from another asset which is gold. So our currency is effectively a derivative whose value will be based on a precious metal. Whether that will increase confidence in the ZWL$ currency remains to be seen.”

Economics professor Tony Hawkins said: “The chances of a ‘structured currency’ — whatever that is — fixing the economy permanently are zero.”

According to Zimbabwe Statistics Agency, the food poverty line has gone up by 62,2% from $432 454,90 recorded in February to ZWL$701 236,89 in March while the year-on-year inflation rate stood at 53,3%.

However, prominent US economist Steve Hanke recently revealed that Zimbabwe’s inflation now stands at 2 257%, making it the highest inflation rate in the world.

Hanke’s annual inflation rate is implied using purchasing power parity from free and black market exchange rate data.

Former Mount Pleasant legislator Fadzayi Mahere said if government mentions anything to do with “gold backing” in announcing the structured currency, then the country was heading for disaster.

“If they mention anything to do with ‘gold backing’, know it’s a scam. What happened to the gold backed Ziggy jiggy? Did it stabilise the economy? You don’t ‘launch’ a currency like you’re launching a Macheso album. It is called ‘legal tender’ for a reason. It must have the force of law. You can’t roll out something as important as money without a legal statute,” she posted on her X (formerly Twitter) handle.

“Why not give people notice of what you’re trying to do so you calm suspicion? They have a knack for taking an economic idea and mangling it so it implodes — look no further than the forex auction that wasn’t an auction. How many times do we need to learn the lesson that command economics does not work?”

Zimbabwe Banks and Allied Workers’ Union raised more concern over the incoming structured currency saying workers cannot always be the losers.

“Whatever you are planning with the so-called structured currency launch, make sure you touch not the little gains workers made in collective bargaining. Workers must collectively reject anything that causes them losses again. In the past workers disproportionately lost their pension savings and had their negotiated salaries seriously debased. This ritual cannot continue to go on like this at the expense of the working class,” said the union.

Zimbabwe Congress of Trade Unions secretary-general Japhet Moyo weighed in: “We can only speculate whether this will work or not, but what is clear is that this is experimental since government is trying to only fix the symptoms of a problem it denies exists. There was no consultation therefore issues of trust are going to weigh against the move. There’s no ownership to what is being rolled out and whether what is currently called multiple currency basket is phased out.

“So many questions are lingering without anyone bothering to calm the people’s fears considering past experience.” Newsday


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