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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