MDC Leader Says Mthuli Ncube’s “Guerilla Economics” Won’t Work
MDC president Nelson Chamisa has laughed off the latest effort by Finance Minister Mthuli Ncubewho, through government, on Monday announced a ban on the multicurrency regime which has been in use since early 2009.
Said Chamisa in a rather long statement: “Guerilla economics and ambush currency measures are ill-advised, destructive and confidence-draining.
“Zim-dollarization requires that macroeconomic fundamentals,public confidence, trust, fiscal discipline, political stability and legitimacy be in place for it to be meaningfully sustainable.
“Our economics suffers from too much state control and excessive politics otherwise known as economic dirigisme.
“It is my considered view that certain key benchmarks need to be achieved before the local currency can be sustainably introduced in order to anchor the local currency.
“These benchmarks include: attaining a sustainable GDP growth rate of at least 7%; low and stable inflation; reducing the high debt ratios to very low and sustainable levels; increasing the level of savings and investments to at least 25% of GDP; reducing the balance-of-payments deficit to less than 5% of GDP; increasing the export level to at least 25% of GDP; high levels of productive capacity; political stability and legitimacy.
“More importantly, foreign-currency reserves need to be built up to sustainable levels to anchor the Zimbabwe dollar and to defend it in the event of a currency or speculative attack.
“We have the SMART economic blueprint as our alternative to the current voodoo approach to economics. Think differently.”
Chamisa favours a return to the US dollar and introduction of local currency only when fundamentals which include production are in place.
Zimbabwe adopted the U.S. dollar as its official currency in 2009, when most Zimbabweans had already ditched the hyperinflation-wrecked Zimbabwe Dollar.
However the latest iteration of the domestic currency, the RTGS, has struggled to gain trust among large firms and ordinary Zimbabweans. Economic analysts fear 2009 may be repeating itself with the interim currency.
“They (government) are hoping that this will force generators of forex to sell their forex to make domestic transactions and thus create liquidity in the interbank market,” said a bank executive in capital Harare who declined to be named.
“It might work if they can support the market with a large injection of liquidity to complement this. If they can’t, well then people will just hold onto their forex even more tightly than before,” the banker said.
Last week the International Monetary Fund said the central bank should quickly allow the RTGS to float freely so that exporters could sell dollars at the interbank rate rather than surrender them to the central bank
On the official interbank rate, the RTGS currency was pegged at 6.2 but on Monday it was trading between 11 and 12 against the dollar on the unofficial market.
Many Zimbabweans complain that goods and services are still priced in other currencies. While more than 80% of Zimbabweans earn RTGS dollars, goods ranging from bricks to rentals, car parts and many groceries have their prices pegged in U.S. dollars.