Editorial Comment: What de-dollarising Mr Governor?

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Editorial Comment

THE monetary authorities must just accept the obvious, the country is re-dollarising and not de-dollarising.

When you reach a point where even government itself is offering United States dollar pricing, such as the case for passports, how do you expect the market to react?

After all, they take their cue from government.

The Zimbabwe dollar (ZWL) was never going to survive without market confidence or adequate foreign currency cover.

If you were to do a simple test and walk into any shop, offering the discredited Zimbabwe dollar and the greenback, it would not take more than a few seconds for the retailer to accept the latter.

This shows that no one has confidence in the ZWL.

And why should they?

The RTGS traded against the greenback at an exchange rate of US$1: RTGS$2,50 in February 2019, but after the currency was renamed the Zimdollar and made the sole legal tender, it depreciated fast.

Now, the ZWL trades against the US dollar at a rate of US$1:18,20, officially.

The drop makes the ZWL one of the fastest depreciations of a currency to have ever occurred on record.

Yet, government keeps forcing the currency on a market that clearly doesn’t not want it. Ask Zuva, fast food outlets, pharmacies, private hospitals, government departments and parastatals.

In the past few weeks, a growing number of economic experts have described government’s refusal to accept the economy is re-dollarising as being “devoid of reality”.

So why would government keep peddling a rejected and discredited currency?

Because the devalued ZWL allows government to buy US dollars at a fixed exchange rate from exporting companies being railroaded onto the interbank market by the central bank.

What this means is that at the official rate, government can mop up the greenback from those dumb enough to bring it onto the interbank market and resell it on the parallel market.

For a long time, the central bank has been accused of being the biggest player on the parallel market and there is evidence to show that this could be true.

For example, last month, the Reserve Bank of Zimbabwe froze the bank account of a Chinese construction company, China Nanchang, on suspicion of injecting millions of dollars onto the parallel market to buy foreign currency.

After the intervention by the RBZ, the rate recovered a bit.

Either way there seems to be a correlation between the central bank and parallel market.

Also, there is a matter of pride. With no encouragement from anyone, RBZ governor John Mangudya said he would resign if the bond notes failed in November 2016.

Yet, up to now he is still clinging onto his job.

Finance minister Mthuli Ncube in September 2018 said in a few months the economy would rebound. The following year the economy contracted by 7,5% and is expected to do the same this year if the status quo remains.

Despite this, the “Professor” is still in his job with no shame.

We are not trying to be mean, no, but officials must get to grips with reality and listen to what the economy is saying in a clear and loud voice: “We don’t want the Zimbabwe dollar!”