Bottom Drawer: The mechanics for Zim dollar reinstatement

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In 2009, in an article published in one weekly publication, I articulated the reasons why it was too early to reinstate the Zimbabwe dollar.

There has been general disquiet over the matter since then. Instead there have been repeated assurances from fiscal authorities that the multi-currency system will remain in use for some time to come.

This is, however, time to start seriously discussing the modalities of reinstating the Zimbabwe dollar.

At a Chief Executives’ Round Table Conference held at the Celebration Centre some time last year, Energy and Power Development minister Elton Mangoma pointed out that the multi-currency system was likely to remain in force until 2012.

There has been disheartening disquiet over the reinstatement of the Zimbabwe dollar by both the Reserve Bank governor Gideon Gono and Minister of Finance Tendai Biti.

Residents in Kariba some time this year were reported as having resorted to using the Zambian kwacha to solve the crippling change issue bedevilling the economy.

This action by Kariba residents amply demonstrates the need for the return of the Zimbabwe dollar.

It, however, appears as if both the fiscal and monetary authorities have no clue as to how the Zimbabwe dollar should be reinstated.

The monetary authorities’ lukewarm approach to call for the Zimbabwe dollar’s reinstatement is understandable; they presided over its demise and are wary of venturing into pioneering its return.

Fiscal authorities’ disquiet may be either outright cowardice or reluctance to resurrect a dead Lazarus they did not kill in the first place.

In this article, I wish to articulate the mechanics of reinstatement of the Zimbabwe dollar.

In my opinion, it is unnecessary for Zimbabwe, a country endowed with abundant natural resources, to contemplate abandoning its own currency.

Even waiting for the introduction of a regional currency is not a plausible excuse, if anything, it is an unpatriotic move.

The major starting point would be to establish the level of economic activity achieved to date as measured by gross domestic product.

Reputable economic consulting firms and other relevant stakeholders may be used to carry out an in-depth research to establish a number of factors. It is generally accepted that there is illiquidity in the economy.

Economic consultants may be tasked to establish the levels of illiquidity prevailing in the economy. This process would need to be thorough, transparent and credible.

Wide consultations with all stakeholders would need to be done. Some of the stakeholders include financial institutions, industrialists, mining houses and others.

The process would need to be expedited judiciously and timeously so that findings are implemented before they are outlived by events in the economy.

After illiquidity levels in the economy are agreed on, consummation must be made to introduce the Zimbabwe dollar currency on a test basis to circulate concurrently with the multi-currencies already in circulation.

The quantum of the new Zimbabwe currency to be injected into the economy must only be a small percentage of the illiquidity levels perceived to be in the economy.

Massive advertisements must be flighted everywhere prior to this being done. The adverts must be similar but more intensive than those flighted when bearer cheques were introduced. The new currency must be printed on good quality paper.

Much as we treasure and guard jealously our sovereignty, there would be no need whatsoever to sing solidarity and sovereignty songs about the whole process as this may scare away users.

It might even be wiser to introduce coins first in small denominations to try and ease the change problem currently bedevilling the economy.

It would be unwise to recall old coins back into circulation. New ones would need to be minted.

Initial injections of the new currency might start with very small amounts, as little as one twentieth of the perceived illiquidity level in the economy.

It would even help further to start with a minute and negligible figure. Whatever figure is injected in the market however, would need to be made known to all stakeholders.

Advertisements targeting specific user groups may be necessary. For a very long time commuters and commuter omnibus operators used Z$50 billion notes to alleviate change problems.

These people may have been encouraged to do the same with the new coins. We squandered a good opportunity.

If for instance, a media house has succeeded in using tokens to ease change problems, there is hope that people will accept coins introduced by the central bank.

At no time should people be forced to accept the new currency if in their opinion they do not want it. New currency use would need to be entirely voluntary.

All State enterprises and establishments would be encouraged to immediately accept the new currency for all transactions involving members of the public and the corporate world.

Any refusal by these entities to accept the new currency would be a debilitating blow to the success of the operation.