AMERICAN water conomist Steve Hanke has mocked Zimbabwe’s introduction of its new currency, the ZiG, declaring that the country is on a merry-go-round regards its monetary policies.
The ZiG, which Reserve Bank of Zimbabwe (RBZ) Governor John Mushayavanhu promised is backed by gold, replaced the RTGS and Bond Notes whose value had heavily plummeted.
From a US$1: ZW$1 exchange rate at inception in 2016, the notes had fallen beyond the US$1:ZW$25,000 rate when they were demonetised last week.
Efforts to revive the currency hit constant brick walls.
“Zimbabwe has introduced a new currency – the ZiG – the sixth in TEN YEARS,” said Hanke.
“The ZiG is supposed to be backed by gold. BUT WHERE’S THE GOLD? Where there’s a ZiG, there’s a ZAG.”
Hanke’s comments implied Zimbabwe was just in a Zig Zag.
A Professor of Economics at America’s Johns Hopkins University in Baltimore, Hanke has been an ardent critic of Zimbabwe’s monetary policies.
Hanke has never made it a secret that he does not believe President Emmerson Mnangagwa, his Finance Minister Mthuli Ncube and the RBZ are making the right decisions regards currency issues in Zimbabwe.
He is a strong supporter of dollarisation.
His criticism of the ZiG, comes at a time when informal businesses have decided to reject the RTGS and Bond Note despite RBZ assurances they remain legal tender until the end of April 2024.
Mushayavanhu was forced to release a statement Wednesday in which he assured consumers and businesses the notes would still be accepted and should not be rejected.
Over the weekend pro-opposition online publication, NewZimbabwe.com revealed private transport operators, tuck shops and vendors were rejecting the old currency and rounding off prices to the nearest US dollar.
“The RBZ has taken note of the concerns of the public emanating from the rejection of the ZW$ notes to be demonetised, which has resulted in the unavailability of ‘change’, thus forcing businesses, mainly commuter omnibuses to round-off prices to US$1,” said Mushayavanhu on Wednesday.
“The Reserve Bank would like to reiterate that the ZW$ notes currently in circulation are still valid and remain legal tender until 30 April 2024. Accordingly, the ZW$ notes should continue to be used for transactional purposes at the announced ZiG/ZW$ conversion factor of 2498.7242.
“Business entities where the notes have been widely used, including commuter omnibuses, shops, fresh vegetable markets, and vendors, are advised to continue accepting payment in ZW$ notes until 30 April 2024.”
Zimbabwe is in a seemingly never-ending economic crisis that is now over two decades long.
After the economic upheavals of the early 2000s, Zimbabwe recorded a brief break from price hikes and record inflation between 2009 and 2013 during the Government of National Unity (GNU), a transitional coalition between Zanu PF and opposition parties.
The introduction of Bond Notes which former RBZ boss John Mangudya said would save Zimbabwe’s waning economy worsened an already volatile situation.
Locally Mushayavanhu’s experiment is being viewed as a repeat of what former RBZ Governor Gideon Gono did with Bearers Cheques, Travellers Cheques and deletion of zeros on a currency that reached record note value in the trillions.
Steve Hanke’s academic career as a water resource economist in the Johns Hopkins Department of Geography and Environmental Engineering (now the Department of Environmental Health and Engineering). In 1981, Hanke was appointed a senior economist with the president’s Council of Economic Advisers, where his responsibilities included the Reagan White House’s water portfolio. While at the CEA, Hanke led a team that re-wrote the federal government’s Principles and Guidelines for Water and Land Related Resources Implementation Studies, to include more rigorous benefit-cost analysis requirements.
Hanke continues to be active in the water resources field, focusing primarily on municipal water system privatization. He is currently a member of the Johns Hopkins University Global Water Program.
In 1998, he was close advisor to the former Indonesian Prime Minister Suharto and led to the collapse of his government after catastrophic economic problems and IMF advised governments around the World not to take his libertarian economic views seriously.
