Opinion / Columnist
Mnangagwa has to make bold currency decision or face political demise
06 Jun 2022 at 12:45hrs | Views
The president has to make hard currency decision sooner than later as doing that in 2023 will cause so much economic pain that may cause a huge protest vote which may send him home.
The country need to run on one currency to stop arbitrage, structural deformities and subsidies.
One of the false equivalence that has emerged after the bread price increase is that because bread was 90 cents under RGM by inference his economic management was better and that therefore we have to go back to US$ economy including the often said US$540 basic salary for most civil servants.
That comparison is flawed and may lead to people desiring solutions that are not feasible because they are based on a false premise.
The economy stabilised from 2009 to 2013 because of austerity with no significant expansion.In fact most started with a US$100 salary for 6 months.Those were hard and bold decisions.
The self dollarization in 2008 and then later dollarization in 2009 may be an albatross on our neck.A lot can't imagine an economy with US$ despite everyone else in the world have local currency.
Stability was achieved during the GNU era with lots of austerity.That austerity doesn't grow the economy and it turned the economy into a huge supermarket economy of South Africa, China and Zambia.
After the force fed elections on the Jelousy Mawarire Court victory ( those elections should have been avoided ) the RGM team abandoned the austerity with expansionary policies in both debt accumulation, welfare economy, agriculture support and heavy subsidies.In fact government was subsidising every purchase.
They did that by using the facade of currency remaining at 1:1.The money for RGM era of 1:1 simply didn't exist.
They basically broadened the money supply by creating phantom money in the banking system (m3) which they made falsely equivalent to US$.
So each and everyday we purchased bread , fuel, mealie meal etc we were doing so using money created by the central bank which didn't exist and was made 1:1.So it was a big hole everyday.It wasn't going to last and somehow it had an expiry date.
So that hole that was dug required drastic action but I didn't expect it to be so drastic as to allow Mangundya to rob everyone by introducing gedye gedye wiping out our phantom yet contractual us$ within weeks.
ED is subsidising a network who arbitrage on a false auction system and rate.Fact is there is no need to produce when you can make 200 percent profit from trading currency. Currency is currently the business of buying at auction and selling at alternative market
Eddie Cross is no longer a favourite of many as some see him as a person who committed a crime by molly codling with ED but he is right when he says we can't run two currencies then expect to have a meaningful economy.Zimbabwe need own currency.
It is impossible to compare economic eras in Zimbabwe because we have no constant and variables often change weekly since 2014.Since 1997 this economy was all trial & error.In fact the economy was so mismanaged that people now believe in short term joys not sustainable economic policies
ED has to make very tough and bold decisions on currency.It will cause pain to either industry or general people and not both but its a bridge which has to be crossed.US$ kills industry and ZW$ kills masses so he has to choose who has to absorb pain on the transition to one currency.
It is also either short term pain and long term gain or the reverse but he is prevaricating.If he makes the tough decisions in 2023 he may go home.
That decision is required now.Trying to do it in 2023 will be catastrophic for him.He must not believe these ghosts of sabouters, CIA and opposition causing mayhem.If they are its because he has failed to make bold decisions.
The decisions he will have to make may cause immediate pain but medium term benefit.He has to choose a camp to punish and to please during currency transition.It won't be both.This ruling by decree and statutory instruments is at moment causing pain to everyone.
His team must advice him correctly
The country need to run on one currency to stop arbitrage, structural deformities and subsidies.
One of the false equivalence that has emerged after the bread price increase is that because bread was 90 cents under RGM by inference his economic management was better and that therefore we have to go back to US$ economy including the often said US$540 basic salary for most civil servants.
That comparison is flawed and may lead to people desiring solutions that are not feasible because they are based on a false premise.
The economy stabilised from 2009 to 2013 because of austerity with no significant expansion.In fact most started with a US$100 salary for 6 months.Those were hard and bold decisions.
The self dollarization in 2008 and then later dollarization in 2009 may be an albatross on our neck.A lot can't imagine an economy with US$ despite everyone else in the world have local currency.
Stability was achieved during the GNU era with lots of austerity.That austerity doesn't grow the economy and it turned the economy into a huge supermarket economy of South Africa, China and Zambia.
After the force fed elections on the Jelousy Mawarire Court victory ( those elections should have been avoided ) the RGM team abandoned the austerity with expansionary policies in both debt accumulation, welfare economy, agriculture support and heavy subsidies.In fact government was subsidising every purchase.
They did that by using the facade of currency remaining at 1:1.The money for RGM era of 1:1 simply didn't exist.
They basically broadened the money supply by creating phantom money in the banking system (m3) which they made falsely equivalent to US$.
So each and everyday we purchased bread , fuel, mealie meal etc we were doing so using money created by the central bank which didn't exist and was made 1:1.So it was a big hole everyday.It wasn't going to last and somehow it had an expiry date.
So that hole that was dug required drastic action but I didn't expect it to be so drastic as to allow Mangundya to rob everyone by introducing gedye gedye wiping out our phantom yet contractual us$ within weeks.
ED is subsidising a network who arbitrage on a false auction system and rate.Fact is there is no need to produce when you can make 200 percent profit from trading currency. Currency is currently the business of buying at auction and selling at alternative market
Eddie Cross is no longer a favourite of many as some see him as a person who committed a crime by molly codling with ED but he is right when he says we can't run two currencies then expect to have a meaningful economy.Zimbabwe need own currency.
It is impossible to compare economic eras in Zimbabwe because we have no constant and variables often change weekly since 2014.Since 1997 this economy was all trial & error.In fact the economy was so mismanaged that people now believe in short term joys not sustainable economic policies
ED has to make very tough and bold decisions on currency.It will cause pain to either industry or general people and not both but its a bridge which has to be crossed.US$ kills industry and ZW$ kills masses so he has to choose who has to absorb pain on the transition to one currency.
It is also either short term pain and long term gain or the reverse but he is prevaricating.If he makes the tough decisions in 2023 he may go home.
That decision is required now.Trying to do it in 2023 will be catastrophic for him.He must not believe these ghosts of sabouters, CIA and opposition causing mayhem.If they are its because he has failed to make bold decisions.
The decisions he will have to make may cause immediate pain but medium term benefit.He has to choose a camp to punish and to please during currency transition.It won't be both.This ruling by decree and statutory instruments is at moment causing pain to everyone.
His team must advice him correctly
Source - Dr Brian Sedze
All articles and letters published on Bulawayo24 have been independently written by members of Bulawayo24's community. The views of users published on Bulawayo24 are therefore their own and do not necessarily represent the views of Bulawayo24. Bulawayo24 editors also reserve the right to edit or delete any and all comments received.
