FORMER Finance minister Tendai Biti yesterday sensationally claimed that government was planning to reintroduce a local currency this week, describing the purported move as “pure undiluted insanity”.
But, Finance minister Mthuli Ncube and Reserve Bank of Zimbabwe (RBZ) governor John Mangudya dismissed the claim as a hoax, saying government would continue using the multi-currency system until the necessary economic fundamentals were in place.
Posting on his Twitter handle, Biti said: “The regime will this week introduce a new Zimbabwe currency not backed by any reserves and without any structural reforms which are prerequisite of currency reform.
“That move is pure undiluted insanity. An unbanked currency is just the bond note by another name.”
Contacted for comment, Ncube shot down Biti’s post insisting that the environment was not yet ripe for the introduction of local currency.
“Well he (Biti) is not in government, but I always enjoy interacting with him. I think he is free to comment and also as a member of the opposition that is always welcome.
He keeps us on our toes. We have policy. We will do it [introducing Zimbabwean dollar] when we are ready. We have a game plan, roadmap. We do the needful when the conditions are right,” Ncube said.
“I cannot give a timeline. If you remember, I have always said by 12 months we should have done a lot in reforming our currency and monetary system.”
Mangudya said: “There is nothing like that. There is no comprehensive response as there is nothing to comment on.”
But Biti insisted that Mnangagwa's government intended to introduce a new currency this week. The introduction of a new currency was expected to coincide with the presentation of the Monetary Policy statement by RBZ Governor John Mangudya this week. He later tweeted again:
"The regime has been caught with pants down. It is a fact that a new currency has been printed & that negotiations are taking place now with major holders of cash. It is fact that Cabinet has approved new currency despite paternity fight between John & Mutuvi. Now please deny this."
Biti’s social media post caused anxiety in the market, with the transacting public expressing fears of a repeat of the nightmares they endured in 2008 after the Zimbabwe dollar was eroded by hyperinflation and was eventually phased out.
Economist Gift Mugano said government should do more to improve exports if the proposed new currency is to survive.
“Our trade balances need to be improved, we need to have enough gold reserves as well as put in fiscal discipline measures. At the moment it is impossible to talk of a new currency within the next months. We need to have export-import cover of more than $6 billion so that we could have a healthy trade balance sheet,” Mugano said.
Zimbabwe has been using the United States dollar as its base currency along with other currencies that include the South African rand, Botswana pula and the United Kingdom pound.
In 2016, government introduced a surrogate currency – the bond note – which authorities claim is at par with the US dollar, although it is performing badly on the parallel market, where the exchange hovers around 1:4.