THE latest Monetary Policy Statement and structured currency that was presented to the nation by the new RBZ Governor, Dr John Mushayavanhu, on Friday last week presents both challenges and opportunities for the country’s quest for a fresh trajectory.
The vultures that destroyed our currency are hovering menacingly, trying to destroy the same.
However, the opportunities built into that MPS and new currency will boost ongoing efforts to revive our economy.
Zimbabwe has been hampered by illegal sanctions that have destroyed the country’s economy and currency in order to effect regime change outside the ballot box.
This is captured in the US sanctions law, the Zimbabwe Democracy and Economic Recovery Act (ZDERA) which was effected by the US Congress on December 21 2001. Despite rather disturbing and unfortunate utterances in some quarters that ZDERA does not amount to sanctions on Zimbabwe and that the March 4 declaration by President Joseph Biden that he had removed the numerous Executive Orders against Zimbabwe means that the heinous embargo is now history is contrary to the obtaining situation.
But, that is a debate for another day.
ZDERA makes no secret of the fact that it was enacted to sabotage Zimbabwe, something it has tried hard to achieve for half the last 44 years of our hard-won independence.
Section 4 (c) of ZDERA clearly states Uncle Sam’s intentions to destabilise the country’s economy.
“Multilateral Financial Restrictions — Until the [US] President makes the certification described in subsection (d) and except as may be required to meet basic human rights needs or for good governance, the Secretary of the Treasury shall instruct the United States executive director to each international financial institution to oppose and vote against —
(1) Any extension by the respective institution of any loan, credit or guarantee to the Government of Zimbabwe
(2) Any cancellation or reduction of indebtedness owed by the Government of Zimbabwe to the United States or any international financial institution.”
The US has since pulled out of ongoing debt restructuring talks between Zimbabwe and its creditors.
What this means is that, Harare’s currency was, and still remains, the biggest victim of those sanctions.
Those sanctions made the country a high-risk target for any fresh capital while the currency was severely affected.
The country cannot, in the interim, attract capital at internationally prescribed interest rates.
The damage is severe and in many ways too.
Our currency is deemed not good enough to be attractive to investors.
And proponents of the illegal regime change are still on the prowl, hovering menacingly.
They still want to destroy the economy and our currency, something that Dr Mushayavanhu emphasised on in his presentation.
The new currency, the ZiG, which is gold-backed, seeks to cull the madness that has been created by a hostile market.
The old currency, said Dr Mushayavanhu, was affected by a severe lack of confidence and trust by ordinary citizens.
“With effect from April 5 2024, banks shall convert the current Zimbabwe dollar balances into the new currency which shall be called Zimbabwe Gold (ZiG) to foster simplicity, certainty and predictability in monetary and financial affairs. The new currency will co-circulate with other foreign currencies in the economy,” said Dr Mushayavanhu.
“The starting rate exchange to be gazetted next Monday of the ZiG currency will be at a rate of US$1:13,56 and price shifts will be determined by movements in gold prices.
Accordingly, ZiG notes and coins will be issued in denominations made up of 1ZiG, 2ZiG, 5ZiG, 10ZiG, 20ZiG, 50ZiG, 100ZiG and 200ZiG which will be distributed through normal banking channels and will be fully covered by the quantity and value of gold and foreign currency held as reserves.”
As at April 5, Zimbabwe had ZW$2,6 trillion of reserve money.
This is about US$90 million at the going interbank rate of US$1:ZW$33 903, which is fully backed by US$285 million reserves of precious minerals (US$185 million and forex reserves of US$100 million, says economist Persistence Gwanyanya.
Therein lies our challenge.
ZiG is backed by precious minerals with its price linked to the international gold price. This means that any exploitation of our mineral resources will be closely watched by regime change merchants who do not want the country to succeed.
The other challenge is that already there has been a serious lack of confidence in the new currency as the process of conversion has taken much longer than anticipated.
Most service providers have been taking their time to make their systems compliant.
That severely affects the man or woman in the street as issues to do with change, especially for the commuting public, and payment of service charges has become nothing short of a nightmare.
The authorities must act, and act fast, on these challenges.
But it is not all gloom and doom as alleged by the usual naysayers who are parroting the usual anti-Zimbabwe narrative which now has few takers, if any.
Zimbabwe had US$2,5 billion as at April 5, implying that about 80 percent of local currencies are now in foreign currency.
This means that service providers who accept ZiG will be able to attract foreign currency at a cheaper rate.
Also, the Government will now provide 50 percent funding of export surrender for the national strategic requirements — a huge incentive for exporters.
The Government has also reduced interest rates from 130 percent to just 20 percent, meaning industry and other key players can now attract fresh capital at relatively cheaper interest rates.
“Importantly, RBZ acknowledges the need to revive a savings culture by regulating deposit rates and transactional charges. It is heartening to note that ZiG savings and demand are now attracting rates of 9 percent and 7,5 percent below the bank facility rate which is 12,5 percent,” says Gwanyanya, a member of the central bank’s Monetary Policy Committee.
This means that Zimbabwe can no longer worry about the exorbitant bank charges that they have been subjected to by banks over the years.
Equally heart-warming is that banks are no longer charging maintenance fees for individuals with balances of US$100 and below in their accounts.
As Zimbabwe forges ahead on its development trajectory, there is a need for the authorities to attend to the challenges that have bedevilled the country in the past few days and ensure that the new policies are implemented as seamlessly as possible.
