The Sunday Mail
Section 317(c) of our constitution states that there should be a central bank whose purpose is, inter alia, “to protect the currency of Zimbabwe in the interest of balanced and sustainable economic growth.” Since we can’t “protect” foreign currencies, whose behaviour we have no control over, the constitution provides for a currency of Zimbabwe, albeit having been written during the dollarisation era.
Balanced and sustainable economic growth can only be achieved by having “a currency of Zimbabwe” that we can “protect” and manipulate in line with our economic needs. In other words, without a currency of Zimbabwe which we can protect, we cannot have balanced and sustainable economic growth.
What is now stopping us from walking our talk, as we have espoused in the constitution?
Remember it is us the people who rejected the Zimbabwean dollar in December 2008.
We are the ones who can again flex our aggregate muscle to bring it back — we the people of Zimbabwe.
In fact, we have already flexed that muscle in Section 317(c) I alluded to earlier.
It is only these foreign prophets of doom who are planting these ideas in our minds that dollarisation is our messiah.
I was moved by an editorial in The Herald of May 15.
The paper had this to say, “Local economists have been as scarce as the local currency.
“Besides making political statements, there has been no authoritative voice for or against the return of the Zimbabwe(an) dollar.”
Then we have Dr Tafataona Mahoso, who has made several attempts to give insights about the need to have a local currency, but has been crucified and skinned daring to comment when he is not economist.
Who said that talking about the local currency should be a sacred preserve of those who have read economics textbooks, written by foreigners inspired by their peculiar contexts?
Those who are familiar with the Washington Consensus and why ESAP did not work will sympathise with me. Textbook economists stood approvingly behind ESAP. It failed.
Textbook economists will talk about weak terms of trade and all the jibber-jabber about fundamentals not being yet ideal, as if there is a bell that shall ring to announce that.
My point is why can’t we introduce the local currency now to circulate with the other currencies?
If the economic fundamentals support the introduction of just US$10 million then we should start off with that. This is the time to introduce the Zimdollar.
We have learnt from our own mistakes and we now know what to do and what not to do.
In my last instalment, I quoted Mwalimu Nyerere, who said that independence is the “freedom for us to make our own mistakes.”
We know our mistakes already; this is just the time for us to learn from them.
Those who have been through primary school know that corrections are always done correctly.
Are we saying we are so retarded as to fail corrections? Why then are we afraid to introduce the local currency? Why are we listening to foreign whispers of doom?
Part of the reasons why we are experiencing these tight liquidity conditions is that any US dollar international transaction passes through the Office of Foreign Assets Control (OFAC), which administers and enforces economic and trade sanctions, based on US foreign policy and national security goals against targeted foreign countries and regimes.
We have had many incidences of private citizens and entities whose monies were frozen by OFAC, which prejudices the economy of much-needed liquidity. This is a clear indication that we need a currency of our own which we can protect in the interests of economic development and growth.
I did not entirely agree with Mr John Mushayavanhu’s recent sentiments at the launch of the Central African Stock Exchanges Handbook, when he said: “I believe what we are seeing in this country is not deflation, but a correction of pricing caused by the depreciation of the rand and increased competition… we have a negative inflation rate, which is a good thing.”
Really, Mr Mushayavanhu? Is the current deflation spiral mainly a result of the depreciating rand?
I believe it is a clear indication that the dollarisation honeymoon is finally over and that we should divorce this wife and marry our ideal wife, which is the local currency.
The current is being propelled by falling aggregate demand, which means people have no foreign currency to buy (compared to a couple of years back) and the reduced aggregate demand is resulting in reduced supply of goods and services.
That’s why average industrial capacity utilisation has been falling down since 2011.
If you look at aggregate demand, according to the 2014 budget, it has fallen down from 13 percent in 2012 to 7 percent last year.
We are in typical deflation contrary to assertions by Mushayavanhu. We need to quickly introduce the local currency to bring relief.
It should be also noted that the US dollar appreciation against the rand is actually promoting imports, while choking exports which are our biggest source of revenue in this dollarised economy.
We don’t know when the rand depreciation is going to end, because we have no control over it, but meanwhile we just wait and see as our economy suffers.
If we had our own currency, we could have depreciated it responsibly to turn the odds to our advantage, so that we can encourage exports.
