Zim dollar: ZIMCODD bemoans re-introduction of local currency

ZwNews.com

As discordance about the return of the local money continues, the Zimbabwe Coalition on Debt and Development (ZIMCODD) has bemoaned the apparent policy inconsistency and premature reaction on the part of the government.

ZIMCODD says while the need for a local sovereign currency is not disputed, the government acted against stakeholder expectations of conducting wider consultations with the citizens of Zimbabwe who are the most affected by the abrupt policy pronouncement in line with section 13 (2) of the Constitution which requires Government to involve the people in the formulation and implementation of development plans and programmes that affect them and ensuring that key fundamentals are in place before the introduction of the sovereign currency.

“While the adoption of a local currency is one of the several steps that have to be taken in achieving economic recovery, there is need to address the root causes of the current currency crisis which are rampant corruption, mismanagement of public finances and impunity being enjoyed by those that are fuelling the crisis through arbitrage and resource bleeding,” says ZIMCODD.

“The untimely adoption of the Zim Dollar will only make the general populace who are the workers both in the formal and informal sector suffer more from the market reactions to SI 142/2019.

In the absence of key fundamentals such as productivity; high levels of capacity utilization; healthy capital account; addressing confidence deficit and trade surplus,” the body adds.

ZIMCODD further says it is concerned about the inevitable manifestation of the following implications,

challenges for companies and retailers to restock. “The sudden policy pronouncement is likely to affect companies (including retailers of basic commodities) whose current inventory was acquired in US$ currency.

“The ripple effect of this implication might lead to empty shelves pushing prices upwards and massive job cuts as companies try to manage their operating costs.”

Market watchers are of the opinion that the banning of foreign currencies will further push back the trade in foreign currencies into the black market. Increased scarcity of foreign currencies will only make them more valuable in the market.

They believe that the comparison of good money and bad money remains unaddressed – and the Gresham’s law maintains that “bad money drives away good money” posing a real threat of persistent cash crisis.

They also think that inclusive and consultative policy formulation remains key for public buy-in and confidence building.

ZIMCODD has called upon duty bearers to place high consideration for cushioning the poor, the marginalised and the vulnerable people groups in public policy planning.

Apparently, the Reserve Bank of Zimbabwe (RBZ) governor John Mangudya has reportedly indicated that the central bank will introduce an extra $400 million worth of bond notes into circulation to cover the void created by the withdrawal of other currencies that constituted the multi-currency basket.

He reportedly promised not to print too much; up to levels that will cause inflation.

However, fears are that once he switches the money minting machine,  be won’t be able to turn it off. The ZANU-PF government is documented for having an unsatiable appetite for cash printing.

Mangudya said Zimbabwe’s economy requires around $1.5 billion in cash and currently has between $600-$800 million in bond notes, so there is need to print.