HomeOpinion & AnalysisWhat is in the US dollar?

What is in the US dollar?


Stir the pot: Paidamoyo Muzulu

HARARE’S downtown shops, Mbare and the informal sector have dollarised on their own for various reasons to try to stay afloat in a hyperinflationary economy.

In a country where the government and central bank have basically abdicated their responsibilities, Zimbabweans have taken issues into their own hands. They now trade in hard currency, primarily the US dollar and to some extent the South African rand.

Zimbabweans generally no longer trust their government after the local currency and savings were wiped out twice in a decade because of government ineptitude.

In 2008, the old Zimdollar failed to stand hyperinflation and prices were being adjusted a minimum three times a day. No one could be certain as quotations lost their value and all business was reduced to cash on delivery.

In 2009, the government officially adopted a basket of multi-currencies, but the base currency was the US dollar. It is not clear why this stupid decision was taken. How did the Zanu PF government settle for the greenback ahead of the rand or Botswana pula? It can only boil down to political expediency and pleasing the Bretton Woods institutions.

What is money anyway? Professor Harari in his seminal book — Homo Sapiens a Brief History of Mankind — was very clear that money is just a myth as religion. This is powerful. All world currencies having nothing that back them since they moved off the gold standard after World War II. Now all currencies are based on production or the dubious position of the US dollar as the international medium of exchange.

I say dubious because no African country or developing country was at the table that decided to create the Marshall Plan, International Monetary Fund and the World Bank as enablers of international trade. It cannot be over-emphasised that the Bretton Woods institutions are based in the United States. If it is about value, why does the world not use the British pound or the euro, which are both more powerful than the US dollar?

What Zimbabwe needs is a complete paradigm shift on governance; a competent government that is clear on and consistent in its policies. A government, for example, cannot say the policy in the country is we have a mono-currency — Zimdollar — but in the same breath say other services it offers are paid for in US dollars.

The greatest beneficiaries of dollarisation are the big companies — brewers, telcoms, fuel suppliers and wholesalers — who were all charging way above regional prices in US dollars for the past decade. It gave them a privileged position to harvest greenbacks and expand into the region or continent. They yearn for the return to the period of deregulation, when they could move money across borders without questions.

A case in point is the multiple tier pricing in the Zimbabwean economy, where settling a bill in electronic money or cash has different rates. Or worse still a discount if paying in greenbacks — though illegal, many are accepting it openly for their services. Who is benefiting from this arbitrage?

I have travelled in the region extensively. Everywhere I went, they insisted on payment in their local currency. Traders would direct you to a bank or Bureau de change to exchange your greenbacks into local currency. I witnessed this in Botswana, Mozambique, Malawi and Zambia. In Lesotho, Eswathini and Namibia they accept local currency or rand which is at par with their own currencies.

So where did we get it wrong? It was in Chimanimani when live on national television President Emmerson Mnangagwa in a moment of delusion or a dry joke — do not know what it was — said United States dollars were the real money not bond notes.

This was profound. A whole President denigrating his own currency when extolling the virtues of some other currency remains etched in the collective memory of the citizens. Can he change that? It is practically impossible because the experiences of the past decade have taught Zimbabweans otherwise.

It may be time that Zimbabweans have to sit down and discuss what is money in their perception. Basically, money should be a medium of exchange and a store of value. The storing of value is a duty of the central bank controlling not only inflation, but also running a tight monetary policy. On the other hand, Treasury having fiscal discipline. That is the only way money can store value.

However, Zimbabwe is very different, the central bank and government each day conspire to devalue the local currency by printing more money via Treasury Bills, fiscal indiscipline by government departments and the cost of corruption which pushes the costs of projects beyond what they should normally cost.

If it is agreed that money is a myth, then it is possible to understand why the people need a change of government and see it as a possible factor to spur economic change and local currency gaining value. The bottom line remains; Zimbabweans should produce, trade and save in local currency on the proviso that the central bank and Treasury play their role to preserve the value of the local currency through good policies.

Redollarisation is a painkiller, it may take the pain away for a moment, but the structural issues affecting the economy will remain and fester in the medium-term. It is time for a real discussion by all progressive forces meeting and shaping the way forward. After all money is a myth, we need to up our belief that it is a real thing.

Paidamoyo Muzulu is a journalist and writes here in his personal capacity.

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