Zimbabwe's currency makes a comeback, but many aren't impressed
HARARE – Ten years ago, Zimbabwe scrapped its national currency after people began carting wheelbarrows of bills to pay for flour and milk. Now the Zimbabwe dollar is back and most expect it to tank again.
Meanwhile, almost no one wants anything to do with it.
“I must have foreign currency to import my leather products," said Crispen Dembedza, 51, who runs a leather clothing shop in Harare’s central business district. "Without foreign currency I won’t be able to remain in business – I can't find any local suppliers (of my products) – and if they were any, they would not be able to meet demand.”
Late last month, Zimbabwe banned transactions paid with the US dollar, the Euro, the Pound and the South African Rand – in use for a decade following the crash of its currency – and brought back the Zimbabwean dollar.
The country’s finance minister Mthuli Ncube told parliament Monday the move was meant to instill discipline on the nation’s financial services sector and help the poor who lack access to foreign currency – businesses only want to be paid in US dollars, Euros, Pounds and Rand.
“There must be fiscal discipline and what we have now is fiscal discipline of the highest quality,” said Ncube.
It's also about national pride, President Emmerson Mnangagwa said, telling Bloomberg in an interview just before the introduction of the Zimbabwean dollar that all countries have their own currencies.
“I am not aware of any country which has no currency of its own…except for Zimbabwe… Even poor countries have currencies from what I hear…,” he said.
Now, the country’s central bank chief John Mangudya told the Washington Times that Zimbabwe would move swiftly to print money to close the gap created by the ban on foreign currencies. Mangudya was quick to allay fears of rising inflation saying the Reserve Bank of Zimbabwe was aware of the consequences of printing money.
“We need about $400 million to allow people to access cash so we are going to print that money to cover the gap,” said Mangudya. “We will not print up to levels feared by some people.”
Meanwhile, Ncube said authorities had put in place measures that would ensure Zimbabwe’s currency would not suffer the depreciations in 2008.
Then, after decades of authoritarian rule under dictator Robert Mugabe – ousted in late 2017 – one of the African continent's most promising nations was reduced to economic ruin, with a collapse in its agriculture sector and hyperinflation that left people carrying buckets of cash to buy daily staples. The country has never fully recovered.
Currently, about 90 percent of Zimbabweans are unemployed, according to Zimbabwe Congress of Trade Unions. Three-quarters of Zimbabwe's almost 15 million people can barely afford necessities, living under the poverty line.
As a result of the economic situation, economists warned it was too soon to changeover to a national currency.
Felix Chari, a lecturer in commerce at Bindura University says the absence of sound and structural reforms and the treasury’s decision to abandon the multi-currency regime will put significant inflationary pressure on the economy.
“It’s premature to reintroduce the Zimbabwe dollar without instituting sound macro-economic fundamentals required in stabilizing Zimbabwe’s economy," he said. "The Zimbabwean dollar is vulnerable to inflation due to low levels of productivity and exports. Inflation will continue to rise as the Zimbabwean dollar devalues.”
On the street, that's already evident.
Following the government’s ban on transactions in foreign currency, some businesses reacted by hiking the prices of goods and services arguing that they were importing most of the raw materials and other finished products such as washing powder, tea bags, flour and leather among other commodities.
The price hikes are taking a toll on even those with employment: most struggle to pay their bills on low salaries.
Obert Masaraure, a teacher and leader of the Amalgamated Rural Teachers Union of Zimbabwe says he's not making it. He now earns about 400 Zimbabwean dollars a month, worth US $50 on the black market.
“As teachers we are now (unable) to go to work," he said referring to costs involved in getting to the workplace. "And now we are failing to take care of our families."
It's hit business, too, say local vendors.
“People have limited access to the Zimbabwe dollar so business is now very low compared to previous days when we were allowed to transact in foreign currency,” said Droba Moyowatidhii, 39, a shoe vendor in Harare.
The ban on foreign currency transactions comes at a time when Zimbabwe’s forex reserves were already drying up to the point where some worried about being able to import essentials like electricity from neighboring South Africa.
Naome Chakanya, an economist with the Labour and Economic Development Research Institute of Zimbabwe, predicts increasing instability in the economy in the near future.
“Most economic activities are going to go underground and what that means is that all these transactions are not going into official market," she said. "This makes people lose confidence and trust in authorities and the economy as policy changes are being made abruptly, without any (feedback).”
That's already happening. Dembedza and other businesspeople say they are already using the secondary, parallel – and underground – currency market to access US dollars and other foreign currency to stay afloat.
A former finance minister, Tendai Biti, who is now the deputy president of the main opposition Movement for Democratic Change party, which refuses to recognize the narrow reelection of Mnangagwa in 2018, called the introduction of the Zimbabwe dollar illegal and says it's a disaster for the country.
"We do not have reserves that are necessary to support our local currency,” said Biti. "The currency is subject to political confidence and this country suffers from a (complete lack) of that. The forex ban is a disaster (and) Minister Ncube must repeal it."
Locals agree.
Jason Mukono, 33, a government employee, says he now has nothing to deposit in his bank account.
“I don’t go to the bank anymore because the few dollars that I earn as a monthly salary are not enough to buy me food for one week," he said, adding that he is borrowing money from friends to stay afloat and to get to work. "When pay day comes, I only go to the supermarket to buy a few essentials and then money is gone.”
Photo: July 1, 2019 - Harare, Zimbabwe - Prices of goods are rising almost daily in Zimbabwe after the new Zimbabwean dollar was introduced last month.
Credit: Frank Chikowore/ARA Network Inc. (07/01/19)
Story/photo published date: 07/08/19
A version of this story was published in The Washington Times.
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