Zimdollar return inevitable

Since the medieval evolution of nations, the predominant classic feature of national identity was decoded by economic identity (sovereign currency) and the political identity (the flag).

While we have a peaceful political existence that many in conflict rid countries and sub continents would envy, our economic existence has been subjected to a battery of multi currencies that add up to nine as collective legal tender.

Such a colourful mix of purchasing power predisposes an image of a roaring economic circumstance whose requirement for multiple exchanges smoothens and oils trade and investment save that the opposite is true.

Justifying the necessity of the Zimbabwe dollar is always met with public revulsion not only about the topic but the thought behind it, if not ultimately the person behind the idea.

The acceptance of units of accounts as legal tender is basically a financial as well as economic discourse that itself creates the requisite platform and medium for exchange of goods and services in and between countries. Thus, ceteris paribus, finance and economics are not subjects to be approached in anger, apprehension or corrective justice.

That Zimbabwe does not have its own currency is an outcome of series of failure of diagnostic inferences from monetary authorities on the link between the economy's productive prowess vis-a- viz the quantity of money in the economy and resultant price level (inflation). The simplified version of Zimbabwe's economic circumstance that broke all records on hyperinflation the world over is captured by the classic monetarist averments as represented by the Fisherian equation where money supply in an economy move in tandem with output (M=Q). The amplified version will define and capture the rate at which money exchanges hands as  also important in defining the level of output and price levels (i.e. MV=PT, m is money supply, v is velocity of circulation, p is price level and t as total output).

By printing money, the economy attempted to fix every financial problem with a monetary prescription. This led to price increases as the supply response remained sticky due to inert inability to transform an industry dogged with antiquated production equipment. As supplies of basics became more scarce, consumers made it a point that each encounter with cash meant a stock up of foodstuffs meaning money exchanged hands rapidly (meaning v) which added to further price build- ups as output was inelastic. This meant money earned in the morning would quickly lose value by the end of the day. Add the speculative onslaught, the whole transactory system became mired in information asymmetry such that authorities lost clue of which variable to tinker with. This sent the Zimbabwe's currency imploding as economic agents sought refuge in regional and international currencies.

The inevitable disastrous consequence of this move meant the destruction of the economic fusion that created a working environment for industry and commerce and banks. Where we expected a principled response to the crisis by boosting the supply side of the equation, we witnessed an appropriation of personal and corporate resources in an ill-fated commandist stance towards agrarian equipment finance.

Industry went belly up and as the local consumption gap elicited another speculative vault, an expansive import drive by neighbouring countries destroyed what little was left of local industry. Relaxation of import duties on selected consumables while politically upright nailed the final nail on the local manufacturing sector.

With imports requiring foreign currency the local currency became extinct.

However, there is no country on earth that has come out of the developmental quagmire on the backdrop of a foreign unit of account as legal tender, same as there is no country that has transformed into development through packaged developmental palliatives from International Monetary Fund and the World Bank.

Any economic exegesis is founded on a correct parity exchange value pricing formulation which captures entrenched comparative production and pricing advantages into competitive outcomes on the export market. The expectation of a low price flow in producing for export market is seriously stymied by the pricing dichotomy that compound the input mix in hard currency unlike say in South Africa where the exchange parity differential makes the same cheaper.

This has been compounded further by the "indivisibility" that has been perpetuated in US dollars in some quarters where the shortage of coinage meant the last unit of transaction is tagged at a dollar even for an item such as a shoe lace or toothpick. These have created a hot economy were trade festers more at the expense of real production mimicking the Angolan economy price binge that has made it the most expensive country in the world.

For the country to activate growth, create employment and disposable incomes depends on the creation of a banking and financial ecosystem that is defined by a local medium of exchange. This should not be misconstrued as a wholesale propagation of the reincarnation of a failed currency because of the sovereign appeal of such a unit but grounded and considered financial restructuring that should capture a systematic evolution of the productive nexus of the economy, industrial revamp, respect of property rights and investments, structured export revamp from minerals to agriculture, greater foresight on economic planning and development and overall constructive engagement in global investment.

Natural endowments in our possession do not count as revenue until they are efficiently exploited. Capital infusion from local and international investors' occasion extractive proficiencies that ultimately becomes cash. As most commodities trade on international markets, a voluminous exploitation of minerals create a foreign currency vault required to found any local equivalent exchange. The previous foreign currency kit that Zimbabwe had as reserves before the multicurrency era is largely attributable to minerals such coal, chrome, nickel, platinum, gold and others.

An inward looking industrial transformation need to be implemented to stem currency haemorrhage through imports. At the risk of being protectionist, no country has transformed industry without some form of economic nationalism. China and India are what they are today by some form of state capitalism. Even the bastions of economic orthodoxy such as Switzerland and the Netherlands are driven by public enterprises run by the state. Better still, a cooperative existence of both private and public initiative will tame the tide of porous borders that has allowed dumping at the expense of local industry.

Inferences on ownership should not be guesswork but something rooted in the statutes to give proper investment outlook for would be investors. The world is awash with cheap capital and lines of credit but one characteristic of this flow is furtiveness. At the slightest insinuation of lack of safety it disappears. This explains why Egypt mired in fratricidal war on governance legitimacy has its stock exchange outperforming African bourses such as Ghana, Zimbabwe and Tanzania and can even attract investors from the United Arab Emirates with ease.

Revamp of exports will wipe the trade deficit and this will increase the appeal of the currency as stable and not susceptible to volatility. Zimbabwe is importing most of its consumables. What would happen to our current account if the bulk of the imports are capital equipment? Movement away from consumptive inclination to capital formation will lay the foundation for a viable return of our own legal tender.

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Joseph is an economist and founder of Xuton Finance Group