HARARE – Economist Gift Mugano recently expressed his desire to see the Zimbabwean dollar (ZWL) regain its position as the currency of choice in all transactions. However, he also pointed out that the country’s current policy matrix does not favor the existence of the Zimbabwe dollar, and the situation is cause for concern.
Mugano presented evidence to support his concerns, shedding light on some critical issues that have contributed to the weakening of the Zimbabwe dollar.
“The measures instituted to mop ZWL have brought drought of ZWL- firms can’t access ZWL loans or overdraft and can’t pay bills and salaries in ZWL hence they are now paying in USD. This is happening. Cdes ask if @ZetdcOfficial
if they are not paid USD for their ZWL bills? What does this tell you on the future of ZWL? We are deepening dollarisation,” Mugano wrote on his twitter account.
He added that ompliance with the official exchange rates set by the Reserve Bank of Zimbabwe’s Financial Intelligence Unit has caused USD prices in supermarkets to double.
“Did you see that USD prices in supermarkets are doubling as shops complies with the @ReserveBankZIM FIU requirements to use official exchange rates which are half the black market rates. For example, a crate of eggs has shot from US$4 to US$8,” Mugano said.
“So, this will give lifeline to the tuckshops which are by the way have been given red carpet by Finance minister Mthuli Ncube when he liberalised imports of 11 basic commodities. Formal businesses will push more commodities to tuckshops as they fight to drive sales in a market with low aggregate demand- the supermarkets will not push USD sales at current prices. The sad news is that at the tuckshops ZWL is not wanted. So what it means is that the tuckshops will be an undertaker of the ZWL.”
The delay in payments to contractors and service providers has led to outstanding payments, Mugano said, adding that when these arrears are paid, they are likely to exacerbate the black market rates, further undermining the value of the ZWL.
The 2023 budget has been exhausted by inflation, necessitating the presentation of a double-digit supplementary budget by Finance Minister Mthuli Ncube. This injection of ZWL trillions into the market raises questions about whether the currency will be able to retain its value, Mugano said.
He cautioned against a myopic focus on merely reducing the exchange rate against the USD without considering the broader economic impact. He emphasized that economic stability requires a pragmatic and logical approach, rather than superficial solutions.
Drawing analogies to seeking medical advice or legal representation, Mugano emphasized the importance of heeding expert advice. Ignoring the counsel of economists in favor of personal biases may lead to undesirable outcomes, as the market ultimately serves as the constitutional court of economics, he said.
