HomeOld_PostsZimbabwe’s currency problem: Part One

Zimbabwe’s currency problem: Part One

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ZIMBABWE has been going through serious economic problems ever since we stepped on the toes of our former colonisers and their allies by way of reclaiming our land.
Before the turn of the millennium, pressure from war veterans to repossess the land that was forcefully taken from our ancestors by the British settlers, beginning at the close of the 19th Century, was mounting.
This was because the willing-buyer-willing-seller agreement that was agreed on by the Government after the independence negotiations at Lancaster House was not being honoured.
The white settlers were unwilling to sell Zimbabwe’s fertile land to its people because they had become prosperous from its produce.
Part of the agreement was that the British Government would supply the Zimbabwean Government money to buy the land back from the white settlers.
Almost two decades passed without a notable change of land ownership and the white minority, which made up less than one percent of Zimbabwe’s population, was still in charge of almost 90 percent of our arable land.
In 1997, Claire Short wrote a ‘bold’ letter to the then Minister of Agriculture Kumbirai Kangai on behalf of the British Government annulling the willing-buyer-willing-seller agreement by refusing to supply money to the Zimbabwe Government for land re-acquisition.
Zimbabwe’s land is gifted with fertility and good climate which led our country to become a regional leader in agricultural production for decades.
But all these benefits had only been enjoyed by the former colonisers.
By 1999, the war veterans had become restless because without land, their reason for fighting the war against the British settlers would have been in vain.
Some war veterans began forcefully taking land away from white farmers and the Zimbabwean Government was evoked to act.
President Robert Mugabe made a decision in 2003 to undertake a new policy to re-acquire land through the Fast Track Land Reform Programme.
This was in response to the outcry by the liberators of Zimbabwe and the breach of agreement that was made by the Blair regime in Britain.
The Land Reform Programme was praised by Zimbabweans and for the first time in over 100 years, Zimbabweans were owning farmlands once again.
In response to these developments, Britain and her allies began setting up counter measures such as forming and sponsoring opposition parties like the MDC, imposing economic sanctions such as ZDERA, sending NGOs with a regime change agenda and spreading negative propaganda about the Zimbabwe Government and its leader through the media.
The results of these counter measures by the West were not at par with their expectations and they failed to change the regime and Government of Zimbabwe.
However, they did manage to wreak havoc on the Zimbabwean currency which quickly inflated to levels only reached by Yugoslavia afore time.
By 2008, the inflation rate of the Zimbabwean currency was unprecedented and there were notes reaching hundreds of trillions of dollars.
Trade was also difficult and transactions with other countries were disallowed by formal and informal sanctioning from the West.
Those who tried to do business with the West often had their money frozen and many were restricted from even travelling to the US and the UK.
In Zimbabwe, one would work and at the end of the month, the money which used to suffice a family’s sustenance would be devalued by hyperinflation so much that it could not even buy a loaf of bread.
Banking became impractical and insecurity was the order of the day.
All this had been done to disrupt the Land Reform Programme by ensuring the black farmers would not succeed.
It was also a means of discouraging neighbouring nations from following in the footsteps of Zimbabwe which was the first country on earth to displace white settlers from its land without compensation.
If left to succeed, the West feared other African and formerly colonised groups around the world would follow suit.
Thus Zimbabwe was sanctioned by several Western nations and the EU and the US labelled our country an unusual threat.
To escape this economic predicament, the then Reserve Bank of Zimbabwe (RBZ) Governor Gideon Gono came up with a dollarisation strategy.
This entailed the use of the US dollar as the working currency in Zimbabwe.
This would undoubtedly quell the attacks on the Zimbabwean people’s money because there is no way the West could attack their own currency.
Dollarisation began and was shortly after followed by a multi-currency system which allowed the South African rand, Botswana’s pula, British pound and the Euro, among others, to be formally used in Zimbabwe.
This programme worked and hyperinflation became a thing of the past in Zimbabwe.
Banking also became possible.
There first arose the problem of loose change because only denominations above a dollar note were entering the country.
So businesspeople began rounding off the prices of their products and this caused overpricing.
The current RBZ Governor Dr John Mangudya came up with Bond coins that were of equivalent value to the US dollar and the pricing became more and more favourable owing to the availability of coins.
However, a new problem would eventually arise, that of cash shortage owing to the fact that the Zimbabwe Government could not print foreign currency and was thus depending on the population to somehow source the foreign currency from outside its borders.
Although mobile phone companies offered cash sending, payment and receiving services as plastic or intangible money, this came at a notable cost per transaction.
Automated Teller Machines (ATM) withdrawal and bank card use charges were also unreasonably high.
Foreigners were also looting the US dollars from Zimbabwe because the US dollar is an international currency in the sense that it is used to purchase petroleum the world over.
The situation of cash shortage worsened and by 2014, it reached a breaking point.
The RBZ Governor Dr Mangudya then came up with a strategy to introduce Bond notes that would again be of the same value as the US dollar.
This helped for some time, but before long, some individuals and businesses began stocking the US dollar and gradually the foreign currency was getting scarce.
The shortage of cash then remained as a result.
Some foreigners were offering up to $105 of loose US dollars or Bond notes in exchange for US$100 notes.
This suggests they were taking the foreign currency out of the country and hurting of the Zimbabwean population.
Other institutions such as the American and Chinese embassies were only accepting US dollars and not Bond notes.
The result was that though the Bond and US dollar were officially at par, informally the latter was being valued more than the former.
Even the Bond notes were being released little by little because the Government knew that some unscrupulous dealers were taking advantage of this economic quagmire.
The black market began making available the Bond notes at a 10 percent charge and the US dollars at a 20 percent charge.
To get $1 000 of Bond notes, one would pay $100 and for US$1 000, one would pay $200.
Eventually, there was next to no US dollars in the country. The Bond note has become the only available currency though the multi-currency system still subsists.
The problem is that the Bond notes, though equivalent to the US dollars in value, are not useable outside of Zimbabwe.
And with the US dollar now scarce, it is hard to meet the high demand for cash in the economy.

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