Z$ was imposed to end "fairy tale" exchange rate - nonsense, who imposed the rate! N Garikai

Mr Eddie Cross, everyone who has read your many articles ever since the November 2017 military coup that ousted the former Zanu PF tyrant, Robert Mugabe, to be replace by Emmerson Mnangagwa knows that you are one of the latter’s cheer leaders. Still, this is no licence for your to falsify historic facts in you defence of this Mnangagwa regime.

  

“The real target of these measures (SI 142 and return of Z$) was the exchange rate. This was not an issue when we were living in a fairy tale land where the RTGS dollar and the Bond Note currencies were accepted as being 1:1 USD,” wrote Eddie Cross.

“But when the Minister of Finance in October 2018 announced the obvious to all and sundry, that there was no relationship between what are local currencies and the US dollar, we all went into panic mode.

“We are strange creatures – the Reserve Bank Governor was saying – ‘no, the Bond is not a currency and it is on a par with the US dollar’. We accepted that fiction because we could not imagine what would happen if this were not so. We all had piles of the stuff in our bank accounts and felt rich!!”

This is not the first time the people of Zimbabwe are being blamed for the 1:1 exchange rate between the Bond Note and all the other local currencies that have followed. People like Eddie Cross are forgetting that it was RBZ under instruction from the Minister of Finance and government that stipulated what the starting off exchange rate would be, fixed or float, etc. It was up to the relevant authorities to change the exchange rate at any given time. And so the very suggestion therefore that it was us, the people’s fault the exchange rate was ever fixed at 1:1; is insulting and mischievous.

The exchange rate was adjusted in February to 2.5:1 and allowed to float. Just before IS 142 on Monday 24 June was announce the RTGS$ was trading at 6:1 on the interbank rate and 8:1 on the black market. One does not need a degree in Economics see the local currency was losing its value against the foreign currencies.

Minister Mthuli Ncube started talking of the need to introduce a fully fledge local currency as far back as November last year. "We have to choose an option that is credible, that is sustainable and that is least costly, both in terms of time administratively and in terms of time building reserves. There is a cost to introducing a currency; so you have to evaluate all of this. But before you do that, sort out the fundamentals," he said then.

In April 2019 he told the IMF and WB officials that the new currency would not be introduced for “say 12 months”. President Mnangagwa said the new currency would be introduced “by the end of the year” but not before the “economic fundamentals to ensure its stability were in place”.

The following week SI 142 was enacted, all trade in foreign currencies was receded, just like that! Of course, the regime had done nothing to implement the economic fundamentals such as the reviving of the local economy to increase local production to ease demand for foreign currency by reduce imports and increasing export earnings.

In short, the regime could no longer wait to get the fundamentals right, it panicked, and banished local trade in foreign currencies to easy pressure on RTGS$ that had already lost ground from 2.5 to 8:1 to US$.

Banishing trade in foreign currency will reduce economic activity because being paid in a local currency that is losing its value will make business activities a hell-lot more risky. The empty shop shelves of 2008 are back.

“The real target of the impose Z$ is exchange rate!” Nonsense! How can we do away with exchanging Z$ for foreign currency when we import 70% of our needs. Worse still, since we import far more that we can pay for from our export earnings the local currency will suffer inflationary pressure.

“A currency is simply a means of exchange and used for the accumulation of wealth and as a store of value – nothing else. The stuff we are using as an electronic means of exchange, the so called RTGS dollar, was just the electronic version of the real thing,” explained Mr Cross.

Correct, and if the supply of the currency exceeds the value of the goods and services on market the value of the currency will fall. We all know that is exactly what has been happening in Zimbabwe.

One can say the local currency is suffering the double effect of local and foreign exchange rate inflationary pressures. The Z$ is being “burnt” from both ends and it is the regime to blame for this, not the people!