Bond notes bode ill for Zimbabwe's currency calamity

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A few years ago, an image of a crying Greek pensioner circulated the internet. It was so popular that it became the flagship image for the Greek Debt Crisis. It is the picture of an unfortunate man who lost his life savings because of compounded effects of austerity measures imposed by the IMF to decrease his country's debt and the fact that other countries stopped lending to Greece.

Zimbabwe currencyThis image comes to mind when I think about the Zimbabwean situation right now. Last week, the much dreaded bond notes were released into the economy. In truth, the government has been promising to introduce bond notes as a 'surrogate currency' in order to alleviate the cash crisis in Zimbabwe since 4 May.

Most citizens, however, are negative about bond notes, with good reason — the last time Zimbabwe had anything akin to its own currency was 2009, when inflation was so high (231 million per cent in October 2008 according to the IMF) that the currency had to be dropped to salvage the economy.

How did things get so bad? In late 2001, the Zimbabwe Democracy and economic Recovery Act was signed by Western countries and shortly afterwards the nation faced economic sanctions. Just like Greece, Zimbabwe faced a credit freeze. And, just like in Greece, people went to banks to find their life savings depreciated. However, no one was jumping in to bail the country out.

A drought in 2005 only worsened the situation, as agriculture is the backbone of the Zimbabwean economy. By 2008 the economy was on its knees.

The US Dollar was adopted as a substitute currency in 2009 and it seemed most of Zimbabwe's financial woes were over. That is until the GDP started falling and El Nino struck again in 2015, resulting in another drought. To make matters worse, the mining sector, which had improved after 2008, has been in a state of decline.

This time, the Reserve Bank of Zimbabwe couldn't print more money like they had done with the Zimbabwean dollar in 2003-2008, because the economy has been running on a borrowed currency.

Now that the US dollar has failed to revive the Zimbabwean economy, the Reserve Bank has decided to instate the bond note. This decision was met by protest action which culminated in the 31 August #TotalShutDown Protest.

 

"Will things change for the better? If not we'll be back at square one: illegally crossing borders to reach countries where we are not welcome, so that we can work jobs no one wants for pennies no one deserves."

 

This might seem to be drastic, but most Zimbabweans remember 2008 well: every other month regular citizens had to drive down to Botswana to put food on the table because the country's own shops were empty and people were emigrating left right and centre. For the first time in history the Zimbabwe School Examinations Council almost suspended the local GCSE exams because of stationery shortages. Water and electricity were both in short supply. In May of 2008 a cholera outbreak threatened major cities. 4000 people died, not because the disease was incurable but because they couldn't afford health care.

The newspapers are telling citizens to remain calm — that bond notes are here to alleviate our cash crisis and not add to it. But already the bond note, which has been valued at 1:1 with the US dollar by the Reserve Bank of Zimbabwe, is being bought for $70 for the hundred in illegal markets. Major supermarket chains are refusing to use the tender, and fuel companies are selling diesel at ten cents more than the regular price for customers using the bond note.

Will things change for the better? I hope they do because if not we'll be back at square one: illegally crossing borders to reach countries where we are not welcome, so that we can work jobs no one wants for pennies no one deserves. The only other option is to stick it out in an economical environment where unemployment is 90 per cent and most people who are formally employed do not receive their full salaries at the end of the month because most companies are making a loss.

What Zimbabwe really needs is an economic overhaul. Simply choosing a different currency is like putting a light bandage on a deep wound. It is time instead to think about creating wealth. Long term solutions to problems faced in the agricultural and mining sectors, which have proved to be profitable in the past, would go a long way to increasing the national GDP. Additionally, austerity measures could help the country get back on its feet.

 


Tariro NdoroTariro Ndoro is a Harare based writer. Her literary work has been featured in several Southern African journals and anthologies.

Topic tags: Tariro Ndoro, Zimbabwe

 

 

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Existing comments

"Printing" money wasn't the problem... Mugabe came to power in Zimbabwe and one of the first things he did was to evict farmers from their land. Next, he handed over the land to his friends who didn't know the first thing about farming. So, the food supply was destroyed. Next, Mugabe proceeded to damage his infrastructure and railways to the point that transport of raw goods and other goods became impossible. More and more people were thrown into unemployment. Imports of food and other goods became essential. High tariffs caused importers to abandon goods at the border. A major supply shortage existed. With unemployment above 80% and no real way to provide jobs for the unemployed, Mugabe ordered the government to keep spending. And spend it did, far in excess of the economy’s real ability, ending in hyperinflation. So, it wasn't just “government printing too much money”. Serious damage was done to the economy and “then” excess spending pressure was applied to the decimated output ability. http://elliswinningham.net/index.php/2016/09/19/junk-economics-brief-look-mainstream-mysticism/
Pamela | 08 December 2016


Mugabe needs to go. But there is no opposition. He got rid of them. How is it that dictators flourish he won't go hungry. And he is supposed to be a Christian. Nay a Catholic. But had he been excommunicated no of course not but lesser mortals have here is the justice.
Irena | 09 December 2016


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