SOMEONE has to say it with a strong loud voice: “All these monetary experiments will take us nowhere.”
To put it correctly, in this country there is an environment of chaos and uncertainty as a result of organised crime, corruption, a weak regulatory atmosphere and subversion of the legal system. This truly points to a behavioural and institutional crisis rather than the “currency crisis” which is just a symptom of a deep-seated malady.
Under normal circumstances, Zimbabwe has a five-year economic policy period. There are various economic policies that were implemented in five-year cycles, but two periods stand out: 2001-2005 and 2015-2020. On the chart above, they have one thing in common: “average growth was negative.” From its creation Zimbabwe remained predominantly an agricultural country and for two decades, 1980-2000, it registered an average growth rate higher than the world’s despite relatively unstable pseudo-democracy and sectarian violence. The Gross Domestic Product (GDP) in those two decades remained positive above world average but declined in the 1990s due to globalisation where Zimbabwe lacked foreign investment and, as such, its trade gap had widened, resulting in imports outstripping exports.
From 2006 to 2010, average growth was helped by huge economic recovery in the years 2009 and 2010 as a result of political settlement through the Government of National Unity (GNU) and dollarisation. 2011-2015 was supported by a relatively stable currency environment.
But now what is with those two special periods?
In August 2001, the Millennium Economic Recovery Programme (Merp) was launched to address the continuing decline in economic performance through price stabilisation, exchange rate stabilisation and protection of the vulnerable groups. After Merp had been implemented, there was no upturn in the economic indicators, the main reason being loss of macro-economic balance due to the size of the budget.
Breaking the five-year economic planning chain, the National Economic Revival Programme (Nerp) was launched in February 2003 to provide, inter alia, humanitarian support in the face of a long-term drought. A centerpiece of the economic and social programme was the land reform and redistribution programme which was aimed at redressing the skewed distribution of land and provide farms for landless peasants. The success of this policy is debatable, since there was no significant agricultural output reaped from the distributed land.
On the monetary side, there were various interventions by the RBZ. From the Farm Mechanisation Programme of 2003 which resulted in additional money supply and debt which was passed on to the taxpayer through the RBZ (Debt Assumption) Act of 2015 to Operation Sunrise which, in fact, accelerated inflation.
Interestingly, as inflation raced towards 600%, cotton company Cargill, whose supplier farmers were now burdened with huge stacks of dollars as payment, came up with “bearer cheques” issued by Standard Chartered bank with authorisation from the Reserve Bank of Zimbabwe. The first such bearer cheques were issued in June 2003 and were valid for six months.
The Cargill cheques, whose face value ranged between $5 000 and $100 000, were in circulation until October 2004 .
Three months after the Cargill bearer cheques were introduced, primarily as payment instruments for cotton farmers, the Reserve Bank of Zimbabwe issued its own set of bearer cheques. The first RBZ bearer cheques, with face values of $5 000 and $10 000, were issued in September 2003 and carried the signature of the then acting governor central bank governor, Charles Chikaura.
But that is not the issue, the Farm Mechanisation Programme and Operation Sunrise were grossly abused, creating economic mafias and widening social injustice.
2015-2020 (we may say to current)
Who remembers that ZimAsset was supposed to run from 2013-2018?. This five-year period (2015-2020) was or is (if we include the current period) as scandalous as the 2001-2005 period.Failure of ZimAsset resulted in implementation of various ad hoc policies. From the Transformational Development Plan, Command Agriculture, Transitional Stabilisation Programme to the current National Development Strategy, all within five years.
On the monetary side, bond note (1:1), rapid issuance of Treasury Bills, RTGS dollar, local nostro, ZWL, introduction of Zimdollar, sectors that are allowed to trade in forex, banks must stop lending, the confusion goes on and on to now gold coins, but inflation keep on soaring.
But that is not the issue, just like 2001-2005 period Command Agriculture and all the policy confusion created much stronger economic mafias that further widened social injustice.
The country is in a trap, characterised by instability and highly vulnerable to internal and external realities. The economic difficulties of the Zimbabwean people are growing by leaps and bounds as a result of organised crime, corruption, a weak regulatory atmosphere and subversion of the legal system.
It is clear that there is a need for the necessary institutional framework for successful policymaking. This means that everyone engaged in the conduct of public policy know that a government must have some scope for flexibility, in order to respond to exceptional circumstances, or to deal with challenges not anticipated in advance.
A rules-based approach is the best guarantee of the impartiality, consistency, and predictability of government action. Institutions of government must have clearly defined responsibilities and competencies, as well as the necessary human and financial resources to carry them out. Where the rules and regulations are clear, and where institutions apply them predictably and impartially, economic security will flourish, and social justice becomes possible.
Some of these institutions include: A competent and politically independent judiciary, particularly in the area of commercial law; An autonomous central bank charged with the conduct of monetary policy only; Independent regulatory agencies charged with the supervision and prudential oversight of key sectors, such as financial institutions, insurance companies, public utilities, health; Agencies that guard against anti-competitive practices in private industry, banking and trade; and a Parliament that has access to all the information needed to exercise oversight and control over the executive branch, and the resources necessary to do so effectively.
All monetary reforms will go in vain as long as this environment of chaos and uncertainty as a result of organised crime, corruption, a weak regulatory atmosphere and subversion of the legal system remain unaddressed.
*About the writer: Tinashe Kaduwo is a researcher and economist. Contact: [email protected] WhatsApp +263773376128