The Sunday Mail
Insight
After reading the vicious attack on my person published in this paper last week I felt compelled to respond. These are my last remarks on the Zim dollar.
I enjoyed reading the differing opinions on the subject of the Zimbabwean dollar. Someone recently said, “It is very important that as Zimbabweans we should all learn to debate ideas without personalising them and to appreciate that, besides God, no one person has a monopoly to wisdom.”
Although The Sunday Mail Business Editor, Mr Darlington Musarurwa, who also waded into the debate, succeeded in attacking me stating that my submissions were “way off mark,” “dangerous,” “highly emotional,” and “folly,” he failed to tell Zimbabweans why the Zim dollar should not return.
He also did not understand the reasons which I gave for its return. As such I feel that I deserve an opportunity to clarify a few things, before I move away from the subject of local currency.
Eddie Cross was also part of the debate and I was rather concerned when he lied authoritatively saying: “In 2013, the minister extended the list of currencies used locally to include several others, including the Chinese yuan and the Indian rupee.”
First of all, was it the minister who did that, or the acting central bank governor?
Secondly, did it happen in 2013, or January 2014? If one cannot be trusted in telling a simple truth, why should we have confidence in them telling a major truth?
The first thing doomsayers must accept is that we have witnessed both a change of actors and script at the central bank institution.
Labour, business, Government and civil society have all expressed confidence in the appointment of the central bank’s main actor, Dr John Mangudya.
Just how much more confidence do we require to do the trick?
Mr Cross said that “it will take the appointment and maintenance of sound management at the Bank on a sustained basis over some years for confidence to be restored.”
This is precisely the problem with those opposed to the Zim dollar, they operate on vague and immeasurable arguments.
We were initially told of the lacking economic fundamentals, but once that argument was debunked by looking at countries like Malawi, which enjoy local currencies but do not have anything comparable to the economic fundamentals obtaining in Zimbabwe, the argument began to move away from measurable benchmarks to obscure issues of confidence.
While I agree with Mr Musarurwa that not everything foreign – or Western – is bad, I believe that our experiences have to come first. We can only apply foreign wisdom that is compatible with our circumstances. Mr Musarurwa demonstrated that he did not understand me when he quoted me as having said: “tight liquidity conditions are caused by US sanctions targeted at local assets.”
What I actually said was: “Part of the reasons why we are experiencing these tight liquidity conditions…” In other words, whereas I had said that 10=8 + x, he is alleging that I have said 10=x. This is mischievous.
On my description of economists’ assertions who argue against the Zim dollar return as “jibber-jabber,” I will tell you a quick story about two men called Jesus and Satan.
When Satan was tempting Jesus, he told Him to throw Himself from the pinnacle of the temple, arguing that, “For it is written: ‘He shall give His angels charge over you, to keep you. In their hands they shall bear you up, lest you dash your foot against a stone’”.
The moral from this story is that people with premeditated and preconceived notions usually have the tendency of quoting the truth for wrong reasons, to mislead.
The Zim dollar debates have been packed with people highly skilled in this type of nonsense.
Mr Musarurwa asked very valid questions, that: “But how can the Reserve Bank, which currently does not have any reserves – except for gold coins only valued at US$501 309 – be able to anchor the local unit or defend it?… If we could not defend our local unit then, what makes us confident that we can defend it now, especially when our vaults remain empty?”
I have already answered the first question in my article of last week where I gave the example of Germany which similarly had no gold or foreign reserves. He deliberately ignores that example because I suspect he, like the Independent which also attacked my piece, cannot explain why a solution that worked for Germany cannot work for Zimbabwe. Let’s deal with the facts, not our personal fears.
What I can maybe respond to is his second question which suggests that if we failed yesterday we will fail today. If my young niece can now do what she couldn’t do in 2008 (ride a bicycle), why should we insult Zimbabwe by caricaturing it as a country that is not moving forward or learning from its mistakes or becoming creative and innovative?
Mr Musarurwa also argued that: “It is also folly to assert that the current cash shortages, which have been loosely referred to as tight liquidity conditions, have been a feature of the dollarized environment. Foreign currency shortages pre-date the multiple currency system.”
Although I did not refer to foreign currency shortages as uniquely characteristic of the dollarized environment, I should point out that the real folly is in thinking that liquidity can be equated to cash shortages. Liquidity refers to the degree to which a financial asset, such as bond or commercial paper, is near to purchasing power or cash. We can have funding liquidity which is about the ease of obtaining finance or bank liquidity which is the ability of a bank to meet its immediate obligations as they fall due. In fact, liquidity is multi-faceted and goes beyond mere cash shortages.
It is also incorrect to compare the foreign currency shortages before dollarisation with those obtaining in the post-dollarisation era, this for a number of reasons.
Firstly, people were still paying for many basic necessities in local currency before dollarisation and, as such, could live without hard currency.
Secondly, we had the domestic currency as a reliable local source of revenue, as opposed to the current situation where virtually all our reliable sources of liquidity are from outside the country.
According to the 2014 monetary policy, inflows from foreign investment, offshore credit lines, foreign aid and Diaspora remittances, which are currently key sources of liquidity, apart from exports, have remained “subdued.”
International money transfers received by transfer agencies and formal banking channels, declined markedly by 15% from US$2,1 billion in 2012 to US$1,8 billion in 2013.
So the difference is also that we now almost entirely depend on the external sector, as opposed to the pre-dollarisation era, when he had something to fall back on. Let’s assume that trend continued and inflows continued to flow. How would we respond, simply wait at the mercy of the US dollar?
“If anything, money supply growth has been improving after the multi-currency system,” argued Mr Musarurwa.
To prove that money supply growth has been improving, he carefully handpicked a few convenient indicators.
What he cited was merely a time series behaviour of revenue collections since 2009, last year’s revenue collections (whose target Zimra failed to meet anyway) and bank deposits (from which he should probe the proportion of deposits that are transitory).
Revenue and deposits growth were bound to happen after dollarisation, since all domestic transactions that were happening in local currency are now happening in hard currency.
We can’t expect them to remain constant, for our economy has been growing during the honeymoon days of dollarisation. The key issue, however, is sustainability.
Mr Musarurwa then asks disingenuously: “So, what worsening (liquidity) conditions are we talking about?”
Where is Mr Musarurwa living? Presenting the 2014 monetary policy, Dr Charity Dhliwayo said that the country remains saddled with the following attendant challenges, inter alia: “A severe and persistent liquidity crunch (the emphasis is from the monetary policy)which has made it very difficult for local productive sectors to access sufficient credit to oil the wheels of our economy,” and “these negative developments have magnified liquidity shortages in the economy with increased banking sector vulnerabilities … and the resultant deepening of liquidity shortages has resulted in a vicious liquidity cycle.”
That is how the central bank portrayed our liquidity landscape. Unless Mr Musarurwa is trying to humour us, I cannot see how he can ask for me to point out liquidity conditions that are there for all to see.
He rushes under the skirt of Government and says: “Government’s pronouncement on this issue, as spelt out in Zim Asset, is unequivocal: the multi-currency… will anchor the country’s economic development initiatives to 2018.”
What we should know is that every economic blueprint comes with assumptions, and Zim Asset is no exception.
It is those assumptions that allow authorities to measure whether the policy requires being fine-tuned or not, through the existing monitoring and evaluation mechanism, which is alluded to in chapter five of the blueprint.
My point is: Zim Asset may not be implemented as is if those assumptions prove incorrect, which is not an impossibility. One of the key underlying assumptions of Zim Asset is “improved liquidity and access to credit by key sectors of the economy.”
What conclusions can we make if we try to analyse this assumption in relation to what’s on the ground?
Before we even get inside the actual contents of Zim Asset, there is a part in President Mugabe’s foreword which says “Government will come up with robust and prudent fiscal and monetary policy measures to buttress and boost the implementation of Zim-Asset.”
Can we come up with a robust monetary policy, when our very monetary policy depends on nine monetary policies of foreign nations?
In other words, we are vulnerable without our own currency and the wisdom in the President’s words apparently suggests that we should have our own currency. Introducing a local currency, to circulate concurrently with the foreign currencies, will help Zim Asset succeed. The blueprint which requires US$29 billion (about US$6 billion per annum or 150 percent of national budget per annum) to be fully implemented requires a vigorous funding mechanism.
The Zim dollar is our saviour. As I said last week that funding could come by listing the sale of all farmland mining claims and residential and commercial stands in the local currency and mortgaging them.
The key is to tightly control that monetary supply and use Government’s privileged position as the owner of land to create value for that dollar. If you want to buy land you would have to have the local currency forcing you to take your US dollar to the bank to change it for the local currency.
The Zim dollar is indeed our saviour, but the unfortunate thing with many saviours is that they are often rejected and crucified by the very people they are supposed to save.
I was reading a piece in last week’s Thursday Herald, where one business correspondent authored a piece titled, Proponents of Zim dollar firing blanks and said “The panic cash withdrawals that often follow reports of an imminent return of the local unit are enough evidence that citizens still have no confidence in this currency.”
During Chimurenga days, there was a slogan which goes as follows: vasingazive ngavadzidziswe.
The only reason why the citizens are sceptical about the local currency is because of the misconceptions about the conditions of its return.
The indigenisation policy is there to witness what wrong communication can do to a policy.
The reason why some people withdrew their money was because the rumour was that it was going to be replaced with useless Zim dollars. This is clearly not true so their reaction could have been avoided by simply communicating the facts.
While Mr Musarurwa says “any useful argument on the local currency has to talk about the benchmarks,” he himself did not elaborate any such benchmarks, except the gold backing mantra (when the US dollar he so loves in not backed by gold).
