Of all the feeble excuses proffered by this Zanu PF regime for ending the use of the multi-currency basket in favour of the local currency as the only legal tender; Minister of Finance, Professor Mthuli Ncube’s excuse takes the biscuit! Sanctions!
“There were certain banks that were told to stop supplying US dollars to Zimbabwe because certain transactions would involve entities in Zimbabwe that are under sanctions.,” he explained.
“CBZ was fined US$350 million for doing some transactions where they thought they were helping and we are still negotiating a way out of that liability.
“Therefore the more we used US dollar, the more we expose the transactors and businesses to fines.”
China, South Africa and Botswana have not imposed any targeted sanctions on anyone or any company in Zimbabwe so why did the Minister end the trade in the US$ and British Pound and retained local trade in the Yuan, Rand and Pula?
The truth is the regime hurriedly enacted Statutory Instrument (SI) 142 banishing the basket of other foreign currency as legal tender to impose the local currency as the only legal tender to forestall the growing trend by traders and workers refusing to be paid in the local currency and demanding to be paid in the stable foreign currencies instead. The local currency had been losing its value as inflation has risen from about 10% in January 2019 to 97% at the time SI 142 was enacted.
Having impose the local currency as legal tender, government has been able to meet its soaring expenditure by printing more money at a time when its revenue has been sinking because to reduced economic activity due to the savage up to 19 hours a day power cuts, cyclone Idai, drought, etc. Printing money has solved one problem but created an even bigger problem – it has fuelled inflation. Since the passing of SI 142 inflation has soared from 97% to 175%, almost double in three weeks!
The hyperinflation gene is out of the bottle, there is no putting it back! Zimbabweans remember only too well the hyperinflation of 2000 to 2008 when inflation peaked at 500 billion % and the local currency was not even the paper it was printed on, at Z$ 35 quadrillion (35x10^24) = US$1.00. Most economic activity seized, it was impossible to do business and be paid in a currency who value was disappearing like water poured in the desert sand. It was not worthwhile going to work, shop shelves were empty and finding enough to eat and other essentials was a nightmare. We are heading for those 2008 nightmare days again!
The Z$ was scrapped and the multicurrency as legal tender was introduced in November 2008 to restore confidence in a stable currency. One only hopes that sanity will prevail and the stable currency reintroduced long before inflation hit the dizzying height of 2008 and survival is once again near impossible!