President Emmerson Mnangagwa reiterated the need for a new currency in the country. This time speaking to Bloomberg TV while at the 12th US Africa summit in Mozambique. He again mentioned the fact that the currency would be the sole legal tender. The move is being proposed as a way to ditch the failed RTGS dollar, doomed since its inception as the bond note.
Again the words caused a stir and murmurings became much louder as people questioned the idea. With many people questioning the 9 months. Earlier we were informed it would be this year but 9 months out would be in 2020. The hurried talk of the new currency is spurred by the impending expiry of the presidential order that brought the bond note into being prior to its Christening to the RTGS dollar in February 2009.
The Herald also quoted Mthuli Ncube as saying the government had managed to contain the fiscal and current account deficits and hence this would support the imposition of a new currency. It is hard to understand the minister’s logic as the containment of these deficits has failed to support the current currency. The RTGS dollar has had a spectacular decline in both the interbank and parallel markets. Nearing losses of 60% in both markets since its inception.
Prior to the introduction of the bond note, many citizens and analysts spoke out about how the note would bring trouble for the nation. The then Robert Mugabe led government ignored the calls and even went to the extent of arresting those who participated in anti bond note protests. 5 years later the effects are plain for all to see.
Finance minister Mthuli Ncube claims that the money supply position in the country is not under threat from the issuance of treasury bills or fiscal deficits. In the same report, the Herald quotes President Emmerson Mnangagwa as saying it is currently difficult to determine the money supply in the nation as a result of the multi-currency regime. The graph above shows however that the Reserve Bank of Zimbabwe was perfectly capable of measuring money supply growth from 2009. The minister says that the parallel market rate spike is a result of speculators who have access to large sums of RTGS. He, however, doesn’t inform us where this seemingly bottomless supply comes from.
Many commentators have pointed out that all this talk may be more of a distraction. The government of Zimbabwe, through its mouthpieces, has not had the best of times lately. A US official came out to correct a news report by the Herald which claimed that President Mnangagwa was holding reengagement talks with the US government. In the same week, the EU Zimbabwe mission clarified a project reported as being commissioned by the government was, in fact, a project by the EU and partners.
By all measures, Zimbabwe’s economy is falling apart. Inflation recently came in at just under 100% year on year. Fuel and electricity shortages have left the industry in trouble and workers are starting stage sit-ins at work as they claim incapacitation. It is clear that current efforts are not enough. A surplus with no visible effects though heavily defended by the Finance Minister is not a comfort to the people.
A new currency looms if these two leaders are to be believed. There’s little to be excited about as this is a path we’ve walked down before.