Many saw it and called it ahead of its introduction, the return of the Zimbabwean dollar was certain to end in failure. Simply put the fundamentals were never in place, the system was never ready to support any currency. Year to date the Zimbabwean dollar has lost 85% of its value on the interbank market (from February and 86% of its value on the parallel market (from January).
After a period of horizontal movement while awaiting the new notes and coins the exchange rate resumed its upward march and broke new high levels. The increase in cash or at least the belief in it is evidenced by the movement of the parallel markets cash rate above the interbank rate. In a country where electronic money attracts a 40% premium to purchase cash.
This is surely not what the team at the Reserve Bank of Zimbabwe had in mind on February the 22nd when they decided to allow what was them called the RTGS dollar to float with restrictions which were later relaxed. In spite of multiple cautions from economists and analysts the apex wanted to have the final say, however, the market has taken that honour as it clearly showed disdain for the local currency.
The reasons behind the failures of the interbank market and the currency are no secret to anybody remotely paying attention. However, the authorities at 80 Samora Machel have chosen to address the wrong issues time and time again with the backing of equally questionable decision making from the ministry of Finance and Economic Development.
With what is likely to be the most depressed festive period in recent history already looming the currency is likely to take another battering before annual shut down. With many businesses from retailers to manufacturers reporting volume declines across the board in spite of inflation-induced increases in monetary measures there is very little joy expected.
The RBZ has plans to improve the efficiency of the interbank system through an electronic trading system and use of the Reuters real-time reporting system. Another case of misplaced priorities as surely the popularity of the parallel is testament to the fact that the interbank market is not doing its job of distributing foreign currency to where it is needed. Efforts should squarely focus on making it work first before we think about making it better.