Mnangagwa lets cat out of the bag

Vice-President Emmerson Mnangagwa let the cat out of the bag last week when he declared that the Reserve Bank of Zimbabwe's proposed bond notes will be a mode of transaction that the government will control.

Mnangagwa told a luncheon to make the official opening of the fourth session of the 8th Parliament that a law was being crafted to support the introduction of bond notes.

He made it clear that the government would not listen to a large section of society that is against the introduction of the currency.

Zimbabweans are sceptical about the soon-to-be-introduced bond notes because memories of the hyper-inflation ravaged local currency are still fresh in their minds.

Many people whose livelihoods were destroyed by the demise of the Zimbabwe dollar are still struggling to rebuild their lives and any changes to the currency system that has been obtaining since 2009 is bound to unnerve them.
Other than the right economic fundamentals, currencies are kept afloat mainly by perceptions.

Once a currency is viewed negatively in the economy, its death becomes a matter of when, as became the case with the Zimbabwe dollar.

The Zanu-PF government eroded the value of the now defunct currency by running the printing presses non-stop even when the economic fundamentals dictated otherwise. Zimbabweans eventually lost confidence in the currency and the rest is history.

This is why it was so critical for the RBZ to manage public perceptions of its proposed United States dollar surrogate currency with care.

RBZ governor John Mangudya first announced plans to introduce the bond notes in May at the height of a debilitating cash shortage in the country.

At the time, Mangudya's announcement appeared to be a knee jerk reaction to the cash shortages as he had no clear timeframe for the introduction of the bond notes or a coherent explanation of the purpose of that proposed instrument.

Initially, the RBZ said the bond notes would be introduced in October but Mangudya was last week quoted saying the "currency" can only be unveiled next month.

The governor has spent the last five months trying to assure Zimbabweans that the surrogate currency would not suffer the same fate as the Zimdollar, largely because he claimed the RBZ would be constrained from printing notes at will by the Afreximbank $200 million facility used to back them.

Zimbabweans who have reservations about the bond notes fear that the Zanu-PF government would abuse the printing presses as it used to do during Gideon Gono's time to fund its power-retention schemes.

Mangudya has stuck to the line that the printing of the bond notes would be determined by the country's export receipts.

However, Mnangagwa's statements undid the governor's work and left many people asking about the government's real intentions.

The vice-president also appeared unapologetic about the government's determination to force an unwanted currency down the people's throats.

He said: "Allow me to tell our people that it's better they realise that we are not going to change, they better accept the reality that bond notes are coming."

It was such arrogance that sunk the Zimdollar and we have no doubt that Mnangagwa sealed the fate of the bond notes with those irresponsible statements.

Solving Zimbabwe's currency problems would need better strategies informed by our tumultuous past.