THEY say a picture is worth a thousand words. The same can be said of an iconic image of a boy carrying bricks of worthless Zimbabwe dollar notes at the height of the country’s unprecedented economic collapse.
BERNARD MPOFU
Many agree that this picture showed the unpleasant realities of Zimbabwe’s historic currency crisis experienced nearly two decades ago.
Amazingly, that same picture is now trending again but this time on social media not legacy media.
This time, the boy is now a man and the contrast between his current demeanour and his yesteryear picture has generated a lot of interest.
Many Zimbabweans say, judging from the looks, the boy’s economic fortunes have not changed much since 2008 when the authorities were forced to ditch the local currency for a basket of foreign currencies to stem record inflation.
If anything, life has become more difficult for this man as the country has been pummelled by cycles of currency volatility and economic implosion.
For many, the dramatic collapse of the Zimbabwe dollar in 2008 reminded them of how Zimbabweans mocked neighbouring Zambia when the kwacha became a laughing stock after plunging in the early 1990s.
The tables have turned and the story of the local unit losing value continues and many retailers are now frowning at the domestic currency.
The southern African nation has outlined an ambitious plan to transform into a middle income economy over the next six years.
With no stable currency, amid record inflation and high levels of unemployment, not many are convinced that millions living in extreme poverty will lead better lives soon.
In the run-up to the August 2023 general elections, the authorities took a hawkish stance hinting that the use of the United States dollar would soon discontinue despite government figures showing that over 80% of transactions were now being done in foreign currency.
That changed after the polls. Experts say the government extended the use of the greenback as legal tender until 2030 in a desperate move to reduce policy uncertainty amid an imminent collapse of the local currency as the year 2023 brought about one of the stormiest economic periods of the past five years.
According to Johns Hopkins professor of applied economics Steve Hanke, Zimbabwe suffered consistent record-breaking inflation rates, at times exceeding 900% and reaching a peak of 1 000%.
In his January update, Zimbabwe was leading the pack with (1 024%/yr), followed by Argentina (198%/yr), Syria (153%/yr), Lebanon (112%/yr), & Venezuela (103%/yr) as the world’s top five countries with the highest price increases.
Experts say since January 2023, the Zimbabwe dollar has depreciated by -90.83%. They say the country is currently facing market turbulence, with a growing gap between the official exchange rate and the parallel market rate.
Officially one needs ZW$8 867 to buy the US dollar but on the streets of Harare nearly ZW$15 000 is needed to get the same amount.
Brokerage firm Fincent Securities in its yearly review and outlook for 2024 says currency stability was one of the worst indicators during the past year.
“Zimbabwe recorded the worst currency performance in the world in 2023. Since January 2023, the ZWL depreciated by -90.83%,” Fincent says.
“The country is currently facing market turbulence, with a growing gap between the official exchange rate and the parallel market rate. Despite a brief period of exchange rate stability in the first half of 2023, this proved transitory as rates began escalating again in the third quarter, and new tax measures implemented by the government are contributing to this increase.”
In rural areas such as Bikita and southern parts of the country close to the South African or Botswana borders, the local currency is now elusive.
The rand is given as change. R10 is pegged as the equivalent of US$0.50. The country’s highest denomination can no longer buy candy.
Economic commentators and market watchers say apart from the not-so-pleasing macro-economic indicators, corruption, an unsustainable debt and lack of political will to adopt neo-liberal policies will hamstring Harare’s quest to mend the battered economy.
The World Bank says increased dollarisation of the economy and changing measurement standards has complicated the tracking of inflation.
“Zimbabwe’s macro-economic instability has progressively pushed up the use of US dollars, and foreign currency deposits increased from about 20% in 2019 to almost 80% by August 2023,” the bank says in its latest economic update on the country.
While the projected economic picture has not been that rosy, analysts say the country’s economic outlook appears moderate, reflecting continued global headwinds, structural bottlenecks, weather-related shocks, and price and exchange volatility.
They see the economy expanding by 3.5% driven by mining and agriculture sub-sectors such as tobacco and cotton.
During the past year, the monetary and fiscal authorities introduced several interventionist measures to save the local currency and restore economic growth.
However, all these measures have failed to strengthen the local currency, Fincent says.
Efforts to stabilise the Zimbabwean dollar included the introduction of gold-backed digital tokens as legal tender to stabilise the Zimbabwe dollar (ZWL) and protect citizens’ purchasing power named ZiG with its value at par with the value physical Mosi-ao-Tunya gold coin as informed by the international gold price.
John Legat, Imara Asset Management CEO, says the “dawning of a new Republic in 2017” could and should have corrected past transgressions which led to the collapse of the Zimbabwe dollar.
President Mnangagwa took over from the late long-time ruler Robert Mugabe — who had been in power for 37 years — through a military coup.
“Returning to the present day, we now have a situation where the general public and foreign investors have zero trust in the management of the ZWL by the government but have full faith in a USD bank note,” Legat says.
“Once bitten twice shy, they have no faith in the banking system to look after their USD deposits or in the Government who could change the monetary system at the issuance of a Statutory Instrument, as it has done before. The Government authorities therefore find themselves in more of a pickle than before.”
