By Tendai Biti
The return of the Zimbabwean dollar marks the gross admission by this regime that it has failed and failed in absolute terms and that it will drag everyone along in the plunge to abyss that now awaits this economy.
It is a cynical ,disrespectful and contemptuous move that has absolutely no logic ,sense or justification on any rational ground whatsoever .
A national currency at the end of the day is a relationship that captures the country’s productive capacity. It reflects a country’s output and the strength ,quantity and quality of its real economy.
Indeed in the narrow sense the currency is no more a reflection of the interface between a country’s exports and its imports. In short , a country’s currency is easily a reflection of its current account or trade position.
Thus countries with strong economies that export a ;lot and therefore enjoy trade surpluses will tend to have strong and stable currencies .
This is the reality of modern day currencies that are no longer backed by gold reserves since the seventies.
In this regard to the extent that Zimbabwe’s productive capacity is near to zero, it can not afford as yet to bring back its currency.
Since 2012 GDP growth has been on a downward spiral with growth in 2015 standing at -1,8 % and -3.8% in 2016.
In this same period capacity utilization has collapsed to 15 % of 2013 levels whilst the economy has witnessed massive deindustrialization.
The same period has also seen more than 6000 companies shut down and at least 300 000 workers losing their jobs.
That output has collapsed is reflected in the trade account,where the current account deficit, even by conservative IMF estimates now stands at -15.2 % of GDP in 2014 and a projected -10.3 % in 2015.
Zimbabwe is effectively a supermarket economy consuming goods produced in other countries. In 2014 its exports were $3.7 billion against imports of $6,3 billion. 2015 was no better. Exports were $3.2 billion against imports of $6 ,03 billion.
The bottom line is that Zimbabwe does not have the requisite export base to support a currency. More accurately the country simply does not have a trade balance to even think of bringing the Zimbabwean dollar.
Any currency too needs credible reserves financing the balance of payment to back it. Zimbabwe has a mere $303 million in reserve being amounts left in reserve as SDRs by the inclusive government. That amount represents a mere four weeks of import cover.
But a currency is a measure and indicator of the existence or otherwise of a social contract. A currency reflects in part the respect and confidence that the citizen has in the state or government.
In this regard countries with contested legitimacy tend to suffer invariable currency collapses. An abused citizen simply rejects the authority of the state and the local currency becomes an immediate causality.
The Zimbabwean dollar suffered this fate in 2007. he Zimbabwean public displayed its loss of affection and belief in the Government by ejectment of the dollar .Similar delegitimization has occurred across the globe particularly in Latin American banana republics including Argentina.
The Zimbabwean citizen long ago jettisoned this regime and its currency. It will not accept this new dollar just like it rejected the old dollar.
Indeed the reintroduction of the dollar will have cataleptic consequences to the remaining constructs of Zimbabwe’s pseudo economy.
It is a decision that will see many of the remaining companies reach breaking point and simply shut down. Few are prepared to relive the nightmare of the melt down period of 2007 and 2008.
The move will also engineer a fresh wave of externalization, under banking, tax avoidance and evasion.
Whenever States cross the line and act illegally, even if within the law the citizens innocent activities become criminalized. Rule by the law does not work and simply invites breach. The citizen disengages and reorganizes its affairs to protect itself.
The directive that forty percent of bank deposits starting from 5 May will now be converted to the South African Rand is blatantly unconstitutional and must be challenged in the courts.
It amounts to a devaluation of the US dollar by at least 20 % in real terms given the volatility of the rand.
The move will leave a desperate work force already hit with low disposable income further impoverished.
The return of the Zimbabwean dollar is thus a stark reminder that this is a rogue regime that can not be trusted and is not capable of reform.
The hope is that those who have been running around like headless chickens, flaunting their skirts and high heels batting for this regime, must take a deep breath and make a strategic retreat.
Perhaps the burning question of the day is why has the regime embarked on such a bizarre reckless act.
The answer is that the regime has run out of options.
It has basically run out of cash. It faces huge fiscal pressures and a ballooning budget deficit that it has so far financed through the issuance of toxic treasury bills, which have now reached a saturation point.
The regime is failing to cover recurrent expenditure and has accumulated huge domestic arrears from 2015, including unpaid pensions and bonuses.
More decisively the regime has created a huge gap in RTGS balances that have been raided at the Central Bank. That gap is the real cause of the current cash crises.
Reintroducing the Zimbabwe dollar will allow the responsible thieves to monetize this gap in the new Zimbabwean dollar.
Reintroducing the dollar will also allow ZANU elites including the first family who are drowning in domestic debt to clean their balance sheets using both the Zim dollar – a feat that ZAMCO is failing to do effectively .
Besides with an election less than twenty months away ZANU desperately needs resources to monetize and actualize its insatiable election promises.
So once again a country’s fate and direction founds itself held to ransom by the short term interests of a narrow rogue element supported by a selfish sect of imperial Europe .
This time around ,it is time for the citizen to be angry.
- Tendai Biti is a former Member of Parliament, and Zimbabwe’s former Minister of Finance. He is largely credited with lifting Zimbabwe’s economy out of a turmoil in 2009. Since he left government in 2013, the economy has crashed once more.