Reviving Zimbabwe Dollar Suicidal

Published on 7th July 2009

Against a backdrop of a visibly wobbling Inclusive Government, there are serious political and economic ramifications associated with the premature de-dollarization of the Zimbabwean economy. An impromptu return to the recently-condemned Zimbabwe dollar can only be politically-motivated especially considering that its ardent protagonist, President Robert Mugabe, is suddenly clamoring for its return only five months after its official adoption.

 

Simply defined, de-dollarization is the reversal of dollarization, implying the return to use of a country’s local currency. In the case of Zimbabwe, it means abandoning the official use of the US dollar in favor of the once-condemned Zimbabwe dollar.

 

Instead of dealing with the underlying problems facing the economy, Zimbabwe’s politicians in favor of de-dollarization seem to be implying that dollarization is the issue. The people of Zimbabwe also know that their local currency was a constant source of pain and stress given its worthlessness and inaccessibility. Remember the winding queues that existed everywhere. Zimbabwe’s politicians never shied away from telling the suffering ordinary men and women that keeping the Zimbabwe dollar was the ‘sovereign’ thing to do.

 

At the same time Zimbabwe became a tale of two cities: those enmeshed in royalty and those condemned to abject poverty while the middle-class was completely wiped out. I have no doubt that Zimbabwe has one of the highest ‘Per Capita Benz” in the world because of the past regime’s policies. To the discerning, there was obviously a short-circuit somewhere. Wait a minute, the politicians and the connected became richer because of their ‘hard work’, so they told us, yet the poor became poorer because of sanctions. How hypocritical!

 

It is abundantly evident that Mugabe is trying to push a dubious agenda that has nothing to do with any economic reality. For instance, Mugabe deliberately has it exactly the opposite when he recently said, “Yes, prices may have gone down but the people should have the money,” and that “If they don’t have the money, how will they buy the goods? We can’t run a country like that. We are considering changing that and reverting to our own currency.”

 

In other words he is saying let’s print the money and figure out what to do with it. Doesn’t it start with production and then consumption? (Pardon my elementary economics here). Mugabe’s obsession with consumerism is worrisome. The underlying economic fundamentals have to be addressed first, Mr President!

 

De-dollarization of the Zimbabwean economy could be a slap in the face of reformists as it is the last thing the country needs at the moment. Could that be the reason Mugabe and his men are so vehemently opposed to Reserve Bank Governor Gideon Gono’s removal as his appointment was done in violation of the terms of the Global Political Agreement? Who else can satisfy the job requirements for a vacancy that ‘has arisen’ requiring a “dedicated Reserve Bank Governor with several years of experience directing operations and management of printing money at a national level?”

 

It is therefore not unthinkable that the return of the Zimbabwe dollar is certainly politically expedient. The overarching strategic objective is to enable themselves (Mugabe and his men) to print money that will be used to fund ‘military’ and other clandestine operations by dreaded state agents that will ‘condition’ citizens into voting for Zanu PF given the impending new elections under a ‘new constitution’.

 

The dollarization that occurred in January 2009 in Zimbabwe means that Gideon Gono, a not-so-credible policymaker,  is as good as unemployed at the moment because the traditional roles of a central bank chief to administer monetary policy and any form of exchange rate regime are relinquished. I can understand Mugabe and Gono’s frustrations and consequent political belligerence.

 

Money printed by Gono funded previous violent campaigns. What will be the exception this time around if they are allowed to revive the dollar? It is no coincidence that Mugabe is calling for the revival of the Zimbabwe dollar.

 

For that to happen, Mugabe and his Zanu PF ‘comrades’ have to immediately enflame political tensions so that their differences will become irreconcilable and then pronounce the current marriage of convenience with MDC unsalvageable. If elections are going to be held in eighteen months, an oft-floated time frame as per GPA terms, it is clear that Zanu PF’s plot must begin to thicken otherwise they are behind schedule. It works for them if Zimbabwe slips into becoming a lawlessness nation once again.

 

What research or studies have they conducted which show that the people of Zimbabwe would rather prefer a return of the Zimbabwe dollar? It is all about them and not the people of Zimbabwe. Dollarization has caused Zimbabwe to experience negative inflation and an abundant supply of the once-scarce basic commodities (notwithstanding the academic debate surrounding deflation). Stores and supermarkets are overflowing with all sorts of products at the consumer’s disposal, a rare phenomenon for so many years under the ever-mutating Zimbabwe dollar’s protracted existence.

 

If it were not for extenuating political circumstances that Zimbabwe finds itself in, I would have advocated for partial dollarization where simultaneously, foreign currency is legal tender alongside the Zimbabwe dollar. I would also prefer a dollarization that uses South African Rand instead of the US dollar for obvious reasons such as easy accessibility of the Rand. In any case, for close to a decade, Zimbabwe has always been the unofficial Province of South Africa, highly integrated into it. One wonders why Zimbabwe has not pushed hard to be part of rand monetary union.

 

Dollarization of the Zimbabwe is a necessary confidence-building stimulus to the international community of investors who were leery of investing in a hyperinflationary economy of Zimbabwe, whose inflation record secured Zimbabwe’s entry into the Guinness Book of Records.  Dollarization has already paved way for easier integration of the Zimbabwean economy into the global marketplace as more countries are opening lines of credit for Zimbabwe while investors are lining up to cease business opportunities in Zimbabwe.

 

In 2007, Guinness Book of Records had Zimbabwe listed in ‘every category’  including being the country with  the “most worthless currency, world’s highest inflation, Mugabe voted into top three Dictators… stunning, see how he wiped out an entire commercial farming system in SIX years, now the place is a basket case instead of a bread basket. It goes on and on”, noted Lord Pint, press secretary of Guinness Book of Records.

 

Outside of dollarization there is no viable alternative for Zimbabwe to accelerate its economic regeneration and sustained economic growth. The return of the Zimbabwe dollar, an anathema to the reform agenda, will certainly signify a return to economic and political instability much to the benefit of yesteryear’s plunderers. The people of Zimbabwe have been taken for a ride for too long! Again we call upon Prime Minister Morgan Tsvangirai and his camp of progressives to proactively lead in stirring popular anger and resistance against Mugabe’s machinations.

 

By Dr  Paul Mutuzu

(Co-Founder) National Vision Institute (NVI), an independent non-profit economic and political strategy think-tank focusing on Zimbabwe and Southern Africa region.


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