WHEN President Emmerson Mnangagwa addressed the nation yesterday, there was hope that he would give a clear strategy towards addressing the currency distortions that have left the country on an economic precipice.
The nation had expected that after new Finance minister Mthuli Ncube promised to address the currency distortions in the market, including the prospect of dumping the country’s surrogate bond note currency, Mnangagwa would have gone a step further to give the much-needed confidence in the money market.
The current situation is untenable, Ncube reasoned, given the wild fluctuations on the black market were largely due to the rule of the market.
The bond note, he said, was behind the spiralling of the US$ black market rate and the market immediately responded, but in a very unpredictable way.
The US dollar rate to the bond note and the real time gross settlement rose to about 100%, triggering a wave of price changes.
Yesterday’s State of the Nation Address at the official opening of the First Session of the Ninth Parliament was a perfect opportunity for Mnangagwa to ring currency changes that could address the situation.
But alas, Mnangagwa opted to ignore the current currency distortions and maintained that the country would continue with the current system, including the loathed bond note.
Mnangagwa’s promise to inject $500 million into the market will not help anything if the currency distortions are not addressed.
Market speculation will remain in place, and so is the hunt for the greenback on the informal market that will continue to fuel inflation.
With the issue of currency distortions not addressed, the said $500 million may struggle to bring sanity in the foreign currency market and the money will be quite inadequate to meet the growing appetite for foreign currency by business and the public in general, particularly government itself.
His decision to defer reintroduction of the Zimbabwean dollar until the current negative economic fundamentals have been addressed is most welcome, but what the President forgot is that the bond note is the local currency in another name.
It would be better for Mnangagwa to consider his Finance minister’s proposals seriously. The country does not need the bond note in its currency basket.
The reason why Mnangagwa probably needs the bond notes is because he has the powers to print them to satisfy the skyrocketing government expenditure as well as his Zanu PF party’s populist policies.
Populism will not work if he is serious about addressing the prevailing currency distortions. His government should cut down on its expenditure and avoid printing bond notes to buy US$ and finance its operations.