The introduction of new currency by Zimbabwe’s central bank was ill-timed and new measures announced by governor Gideon Gono on Wednesday fall far too short of addressing the economic meltdown Zimbabwe finds itself in, economists said yesterday.
While acknowledging the removal of ten zeros from all monetary values as a convenience move, economists said the moves including the release of new currency were not the dossier that the could resuscitate the Zimbabwean economy.
Gono introduced a new currency to replace the family of bearer cheque, which however will remain in circulation until the end of the year. He re-denominated all monetary valuations by removing ten zeros and introduced new notes, $500, $100, 25 coin, $20 note $10 note and coin $5 note and coin and other notes and coins to as small as 10cents.
Gono also raised maximum withdrawal limit from $100 billion to $2 trillion ($200 new currency).
Economic commentator Luxon Zembe said while the introduction of a new currency was not “was not desirable” under current environment where inflation continued to go up.
“It was not desirable to do so in this environment where economic fundamentals have not been addressed. You cannot change the currency where government expenditure continues to go up, capacity utilization is still at its lowest, where we have little or no foreign direct investment, no balance of payment support and a stable exchange rate and without the normalization of international relations. These issues are still not solved and can only be solved by addressing the political situation first,” said Zembe.
He said that the new currency was going to be easily eroded by inflation which is Zimbabwe’s number one enemy.
“The macro-economic fundamentals are still the same and this new currency will easily be eroded by inflation which is still going up,” said Zembe.
Zembe said the removal of the zeros will only serve to help financial systems that were being clogged by the zeros. He said it was a matter of convenience and not a solution as the economic challenges still remained the same.
He said that the increase in the withdrawal limit to $2 trillion was way below economic reality.
“The new limit is way off realistic mark because $2 trillion ($200new currency) cannot buy a 2litre bottle of Mazoe,” said Zembe. He said production hours will continue to be lost as workers will be forced to visit the banks for ten days to collect $20 trillion ($2000 new currency) which is necessary for monthly expenditure.
Economist John Robertson said what Gono had done was not a solution.
“The solution lies in addressing issues of scarcity of commodities, of foreign exchange,” said Robertson.
The economists are of the view that the foreign currency surrender requirement which now forces exporters to surrender 65% of their export earnings was a disincentive which will make the export business unviable.
“It s a wrong way of encouraging the export industry. Government should not depend on exporters for its revenue but on taxes,” said Robertson.
Zembe concurred: “It is a dis-incentive and will make the export business unviable.”
Robertson said the removal of the zeros will create confusion especially when dealing with other currencies. For instance, Robertson said, the Zimbabwe dollar was now trading at a rate equal to that of the rand to the US dollar because of the removal of the zeros.