Information, Zimdollar and bond coins The Reserve Bank of Zimbabwe introduced bond coins on December 18 last year
The Reserve Bank of Zimbabwe introduced bond coins on December 18 last year

The Reserve Bank of Zimbabwe introduced bond coins on December 18 last year

Nick Mangwana View From  the Diaspora
They say knowledge conquers fear. And fear stifles our thinking and paralyses our actions. The less the information people are given, the more the erosion of confidence and more people fret about the past.

Having information is liberating, but in some instances it can be vexing.

On December 18, 2014, the Reserve Bank of Zimbabwe introduced bond coins to allow goods to be charged at prices such $0.29 or $0.61.

The problem with the then obtaining set up was that everything was costing at the very least a dollar.

People were being forced to buy chewing gum, sweets or singular units of eggs they did not need or want.

The cumulative effect of spending money you had served for something else on frivolity and trivia enhances poverty.

The introduction of these noble instruments was met with a lot of suspicion, perplexity, anxiety and in other instances, contempt. Maybe more information could have helped.

When Zimbabwe adopted the multi-currency regime six years ago in January 2009, it had experienced some of the most debilitating hyper-inflation ever witnessed in the world.

This was a result of illegal sanctions imposed upon Zimbabwe by foreign powers in response to its own domestic policies such as land reform programme.

It was also arguably a result of an errant monetary policy and lack of fiscal discipline. When the advent of the multi-currency ensued, there was no ceremony, there were no goal posts which marked the point at which Zimbabwe would revert to the use its own currency.

There was no known date set or process set in motion for achieving this.

Zimbabwe just abandoned its own money which had been undermined. The Reserve Bank of Zimbabwe itself acknowledges that the people still feel traumatised by hyper-inflation and its accompanying ills of shortages, wage value erosion, unpredictability and near total economic collapse.

This possibly explains why authorities there did not tell the nation to what end the country would be using the multi-currency.

So far, what is known is that according to Zim-Asset, Zimbabweans would be using multi-currency until at least 2018.

This appears to be just an arbitrary year possibly picked to coincide with the tenure of the current government not accompanied by any structural reform either in monetary or fiscal policy. This explains why Zimbabweans went into apoplectic consternation when suddenly they suspected that the bond coin was a ploy to stealthily bring back the Zimbabwean dollar.

All things being equal, there is completely nothing wrong with bringing back the Zimbabwean dollar. But people have to be made aware of what really went wrong the previous time.

What actions have been taken to make sure these things do not happen again?

If it was forces beyond our control such as economic sanctions, has their incremental reduction changed the situation to avoid a recurrence?

The use of another country’s currency is called currency substitution.

This can either be total or partial. Zimbabwe’s one is total.

A lot of countries in Latin America, Asia and Eastern Europe have done that with the US dollar. But when it was done it was either because of foreign powers’ undermining of the currency as was the case when Cuba did it in 1993 (Cuba’s substitution was partial as the peso remained in circulation) or in transitional economies such as the Eastern Bloc when the economy was being transformed from a centrally planned economy to a market economy. In all the economies that experienced currency substitution, there was a benchmark, there was a target at the attainment of which there would be a multi-currency displacement by local currency. In Zimbabwe, six years down the line there are still no known imperatives at the attainment of which the country would resort to the Zimbabwean dollar.

Maybe they are there and this writer is unaware. If then the author is unaware then a lot of Zimbabweans are not aware as well. And therein lies the problem.

If the people of Zimbabwe are not aware of what conditions would lead to the return of their currency then they will not be aware if those conditions have been met therefore any perceived arbitrary return without structural and cultural conditionality having been met as well as the causality having been addressed is likely to be met with the hostility the bond coins initially faced.

At some point Zimbabwe needs to be able to use its own currency. But only when the conditions are right.

There are a lot of disadvantages in using hard currencies as we are doing.

Least of them is the widening gap it causes between the rich and the poor.

Even Cuba, a country founded on social parity of citizens this was experienced when they decriminalised currency substitution.

Zimbabwe has just become another living testimony as this gap has become so yawningly wide that the citizens cannot make a link between zanu-PF calling itself a socialist party and what’s on the ground.

Zimbabwe has become a big market of foreign goods suffocating its own industry.

Whilst the labour being paid in Zimbabwe is low compared to the cost of living, Zimbabwe remains one of the most expensive countries to produce things in.

It is easier to import things than to produce them including bringing chickens from as far afield as Brazil than to produce them in Mutorashanga, Ruwa or Chegutu.

Advocating for the return of our own currency is understandably considered heretical in other circles. This is understandable because people still bear the psychological scars of 2007-8.

However, let information shared be the therapy to psychologically prepare the people of the return of local currency at some point. It is good for any economy.

Some communities internationally have even founded their own community currencies to promote local economies.

In Britain, there is the Brixton Pound designated by B£. This is a currency that can only be used in Brixton to trade within the community.

It does not replace the Sterling. It makes businesses in Brixton primarily support each other.

They wholesale to each other retail to their community and circulate businesses around each other boosting the local employment and economy as a result.

There over 250 such community currencies in the world.

If community currencies boost community economies, how much would national currencies boost national currencies?

There has been some resistance toward the bringing back of the local currency and supporting bond coins or advocating for a measured return of the Zimbabwe’s own currency can even be considered heretical in some circles. This is understandable, scarred people are scared.

But as long as things are done in a very transparent way with full information given there is no reason why Zimbabwe would remain one of the most expensive countries on earth and very much unfavourable for the production of anything.

If what the Zimbabwean industry produces is too expensive for anyone to buy, it leads to industries scaling down their production and therefore laying off their employees.

The population of Zimbabwe then supports South African industries and even Brazilian agriculture. If that is not absurd then maybe nothing is.

The gap between the rich and the poor cannot be allowed to widen unabated. That will cause social strife at some point.

In any case what is the RBZ’s role right now besides registering and de-registering banks? They cannot determine Zimbabwe’s monetary policy as is done by central banks elsewhere.

If they are not, then they should be busy working towards the introduction of the local currency by supporting the government in installing strong fiscal adjustment programmes accompanied by a monetary policy geared towards the re-introduction of Zimbabwe’s own money.

After that their role should be to restrict price pressures and be the bank of last resort managing the liquidity issues of the country.

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