Structured Currency May Not Cure Zimbabwe’s Hyperinflation, Economists Warn
Economists have pointed out that while the proposed new structured currency might offer additional saving options for Zimbabweans, it may not fully address the country’s hyperinflation issue. The underlying problem lies in the government’s manipulation of financial systems.
These sentiments come as the government plans to unveil a new structured currency this Friday when the Reserve Bank of Zimbabwe Governor, John Mushayavanhu, presents the 2024 Monetary Policy Statement.
Speaking to CITE, Stevenson Dhlamini, an economist and lecturer at the National University of Science and Technology in Bulawayo in the Department of Banking and Economic Sciences, said:
Confidence is a key variable in currency success. As for the confidence in the financial system, Zimbabweans’ behaviour in interacting with this sector does not demonstrate a positive effect.
Dhlamini, however, observed that existing structured alternative financial assets, such as gold coins and ZiG (Zimbabwe Gold, a digital token backed by gold and considered legal tender), have demonstrated stability. This positive trend suggests that the new currency might be similarly well-received. Said the lecturer:
Whether the structured currency will have a significant economic impact is too soon to say until we have full details as to its operationalisation.
Dhlamini also pointed out that structured currencies serve a dual purpose: acting as both a medium of exchange and an asset. As a result, ordinary individuals gain additional avenues for savings. He said:
This means that if the structured currency is transparently implemented and with clear accountability measures, it is likely to lead to less commodification of the USD. This would mean that the ordinary Zimbabwean will have added options for value preservation and savings.
Another economic analyst, Future Msebele warned that as long as the currency was manipulated by “saboteurs,” the new structured currency may not achieve its intended purpose. He said:
We have been here before and everyone knows exactly what will happen. The Reserve Bank (of Zimbabwe) cannot continue to repeat what has been giving us undesirable results and hope for better results this time around.
We expect the new RBZ governor John Mushayavhanu, who has started on a wrong footing, to think out of the box.
Msebele asserted that the country needed to fully dollarise so that people have a more stable capital market. He said:
This will end the sudden capital outflows, and have a balance of payments less prone to crises.
We can only think of these bond notes and structured currencies when there is some form of economic stability.
However economic stability can not only be brought about by changes in the monetary policy, (Prof) Mthuli’s fiscal policy must complement the monetary policy.
Right now there is incoherence and disjointedness of monetary and fiscal policy measures.
Joining the ongoing debate, Bulawayo Mayor David Coltart emphasized the critical need for authorities to rebuild public trust. Without this trust, the introduction of a new currency cannot serve as a panacea for addressing hyperinflation and the depreciation of the existing currency. Said Coltart:
The reason our present currency has performed so badly is that people do not trust the institution responsible for regulating it.
The most important criterion in the running of any central bank is trust. Until trust is restored this new currency is doomed to fail as well.
Trust is only created when those running the central bank are recognised professionals who have been appointed because of their integrity and demonstrable skills, not who they know.
Trust is only created when there is total transparency and the central bank is demonstrably being run for the benefit of all, not just a small ruling clique.
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