TOP economist Gift Mugano has rubbished the government’s plans to introduce a “structured currency” as nothing more than a recreation of past failed initiatives.
This is the latest attempt by Treasury to revive Zimbabwe’s economy which is on a downward spiral.
Online publication, Newshawks reported the new currency will likely be launched by outgoing Reserve Bank governor John Mangudya this Friday.
Mangudya was officially replaced by top-banker John Mushavanhu who officially took over last week. The new central bank governor is expected to announce his policy measures to contain fast-rising inflation and depreciating Zimbabwe dollar.
New RBZ governor John Mushayavanhu
In an interview with NewZimbabwe.com, Mugano pointed out several fundamental weaknesses of the government.
When asked whether the structured currency would help address the currency crisis, Mugano responded with a resounding “no” challenging the notion that the new currency would bring stability. He highlighted failures of previous attempts, such as gold coins and gold tokens, as well as the bond note which was backed by the African Export–Import Bank (Afreximbank).
“Does the structured currency help us to address currency crisis, the answer is no, and that is the V11.
“Why didn’t these gold coins, gold tokens succeed in guaranteeing stability? Then why is a bond note that is backed by AFRI-EXZIM bank failed to guarantee 1:1?”
Mugano accused the government of simply using fancy vocabulary, whilst not bringing anything genuinely new to the table.
“So there is nothing new about what they are talking about, they are just regurgitating the same things they are doing vocabulary nice terms but in reality that is just nothing, They are not going to be launching anything new, the problems are going to continue full stop”, said Mugano.
He further plucked out the cause of the currency crisis in Zimbabwe which included the lack of production, investments and savings.
“We have solutions there are measures, the first thing which we need to address is that a currency is dependent on production, so if you don’t produce as a country you can’t defend the currency.
“So the strength of the currency in any country is a reflection of the country’s production capacity, so the big elephant now is what do we need to do to raise production, we need savings and investments because the savings are identical to savings.
“So then the second question is that why do you need to have savings, because if you are not saving you have no money you can’t create creation, in 1996 the savings GDP ratio was 25 percent right now we are in negative 11% because the people are not saving money, right.
Mugano criticized the country’s political arena, as a field which is also fueling the structured currency as he mentioned that a change in leadership could restore confidence and encourage people to put their money in banks.
However, another economist Prosper Chitambara said the development was welcome considering Zimbabwe’s hyperinflation.
“Given the instability, we have seen over the past weeks or even months in terms of our currency the depreciation that we have seen it’s a welcome development that the upcoming monetary policy statement is going to unveil measures to bring stability to currency and also stability to the macroeconomic, it’s a welcome development we need obviously to be arresting the situation because no economy can prosper or sustainably grow in an environment where there is instability whether in the foreign exchange markets or even instability in the whole macroeconomy.
“Inflation numbers have been going north and that’s not a good development so we need to be decisive in terms of the measures that we implement but of course, monetary policy is just a part of the story it must be complimented by the physical policies and even other institutional policies because ultimately confidence is a function of implementing comprehensive reforms both from the monetary side, physical side and even the institutional side over a longer period.”
Source: NewZimbabwe.com
