Senior government officials have said that the decision to revert to the Zimbabwe dollar in the absence of stable macro-economic fundamentals highlighted both an economic and political emergency.
Their remarks come as the dramatic return of the Zimbabwe dollar has left many wondering about the government’s rationale. The government made the local currency the only legal tender, banning all foreign currencies for domestic transactions.
Speaking to the Independent last week, one of the unnamed senior government officials said:
First, it was political decision to the extent that it was meant to stop government losing control of the social situation.
Second, Mthuli admitted this although he explained it from an economic perspective. He said government had realised the economy was fast re-dollarising itself and it had to intervene. The issue is they had to intervene because if the economy re-dollarised civil servants and other workers were going to demand to be paid in US dollars which government and companies don’t have, and in the midst of this liquidity crisis there would have a disaster as public servants, including the military, risked not being paid.
Third, it would it would have triggered civil unrest and protests, particularly because the exchange rate would have kept shifting and inflation rising rapidly.
The timing to reintroduce the local currency was contrary to December 2019 and March 2020 timelines both President Emmerson Mnangagwa and finance minister, Mthuli Ncube had respectively given. They had promised that currency would be preceded by fundamentals to sustain it.
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