There are renewed fears that the government may be considering re-introducing the discarded and much-derided Zimbabwe dollar after Finance and Economic Development minister Patrick Chinamasa said on Monday that the introduction of the multi-currency regime in 2009 was to blame for the economic challenges Zimbabwe is facing.
Giving evidence on the state of the economy before the portfolio committee on Finance and Economic Development in Parliament, Chinamasa said the introduction of the multi-currency regime had caused an increase in the cost of goods and services, while raising salaries to unsustainable levels and reducing demand at the same time.
“The migration from hyperinflation to multi-currency did a lot of damage to our economy. It pitched our cost structure too high and unsustainably.
“It’s like we devalued the US dollar, where in America a dollar can purchase four cokes, in our case it can only purchase two or one in some cases depending on whether it’s canned or not or where you are buying it from.
“So, in that sense it means that the cost structure is not sustainable, it basically kills aggregate demand which is very necessary for any economy to function.
“Secondly, the wage structure that the private sector is paying is also not sustainable. We are beginning to see the signs now.
“A lot of companies are six, seven, eight months behind, without paying wages,” he said.
Surprisingly, it was Chinamasa, then acting Finance minister, who introduced the multi-currency regime on January 29, 2009, in the wake of the spectacular and calamitous collapse of the Zimbabwe dollar at the time.
The feverish market speculation that followed Chinamasa’s comments on Monday mirrors that which hit the country late last year when the Reserve Bank of Zimbabwe printing company, Fidelity Printers, was reported to have recalled all its contract workers back to work, at a time there did not appear to be any compelling reason for this.
But both Chinamasa and the central bank quashed the speculation then, with Fidelity Printers saying it had not yet been instructed to print the Zimbabwean dollar.
“From time to time when the need has arisen, the company has over the years relied on contract staff, including former employees and will continue to do so,” said Terence Machawira, Fidelity’s legal counsel, in written responses to the News Crew.
“As a high security printing company, we remain prepared and continue to seek currency printing business both locally and globally,” he added.
Former Finance minister Tendai Biti had also said around the time that the Zanu PF government would be forced to reintroduce the shelved Zimbabwe dollar in 2014 to avert total economic collapse.
“The sad truth of the matter is that the Zimbabwean dollar will be back. It is not a matter of if, but when,” the then MDC shadow Finance minister told a press briefing at the party’s Harvest House headquarters in central Harare.
Biti said government revenues had collapsed and the State could not meet its wage bill and other pressing obligations.
“The government has been borrowing to pay the wage bill, in the process committing the cardinal sin that you do not borrow for consumption or recurrent expenditure,” Biti said.
Tony Hawkins, the head of the University of Zimbabwe’s Graduate School of Management, also said at the time that the tightening liquidity in the economy could force a government rethink on the possible re-introduction of the Zimbabwe dollar, adding that there was also always the risk that politicians would seek a “superficial” way out to finance Zanu PF’s 2013 campaign promises.
“I suspect – perhaps fear – that the government will opt for some dual currency option,” said Hawkins in a recent presentation of the 2014 economic outlook.
While economists canvassed by the News Crew yesterday agreed with Chinamasa’s diagnoses of the problems afflicting the economy, they warned against the premature and political re-introduction of the Zimbabwe dollar.
Christopher Mugaga, an independent economist, said the re-introduction of the discarded currency would spell doom and gloom for the ailing economy.
“The economic fundamentals are currently more misaligned than they were in 2008 and government is best advised to continue using the multi-currency system as a way of maintaining stability,” he said.