- - Monday, July 8, 2019

HARARE, Zimbabwe — Zimbabwe scrapped its national currency 10 years ago after astronomical inflation rates had people carting wheelbarrows of bills to pay for flour and milk.

Now, a decade after some momentous and even wrenching political and economic changes, the Zimbabwean dollar is making a comeback.

The problem is that most Zimbabweans expect the new currency to tank, and an increasing number of people are showing a distinct disinclination to have anything to do with it. The currency’s unsteady launch, international economic analysts say, is a sign that the economic dysfunction that plagued this country under longtime President Robert Mugabe hasn’t gone away with his ouster.

“I must have foreign currency to import my leather products,” said Crispen Dembedza, 51, who runs a leather clothing shop in Harare’s central business district. “Without foreign currency, I won’t be able to remain in business. I can’t find any local suppliers [of my products], and if they were any they would not be able to meet demand.”

Late last month, the government surprised the population by reviving the reviled Zimbabwean dollar and abruptly banning all transactions paid with the U.S. dollar, the euro, the pound and the South African rand, which has been in use since the collapse of the national currency.

Finance Minister Mthuli Ncube told Parliament last week that the move was meant to instill discipline on the nation’s financial services sector and help the poor, who lack access to foreign currency.

“There must be fiscal discipline, and what we have now is fiscal discipline of the highest quality,” Mr. Ncube said.

President Emmerson Mnangagwa, a onetime Mugabe ally who took power in 2017, portrayed the currency as a sign of national pride and autonomy.

“I am not aware of any country which has no currency of its own … except for Zimbabwe …,” he told Bloomberg News. “Even poor countries have currencies from what I hear.”

The president said in other interviews that reliance on foreign currencies left the country at the mercy of foreign economies and central banks for its monetary policy.

John Mangudya, head of Zimbabwe’s central bank, told The Washington Times that Zimbabwe would move swiftly to print money to meet the shortfall created by the ban on foreign currencies. Mr. Mangudya insisted that the Reserve Bank of Zimbabwe was aware of the consequences of printing money and would never allow a return to the days of hyperinflation.

“We need about $400 million to allow people to access cash, so we are going to print that money to cover the gap,” said Mr. Mangudya. “We will not print up to levels feared by some people.”

Bad memories

Meanwhile, Mr. Ncube said authorities had put into place measures that would ensure Zimbabwe’s currency would not plunge in value the way it did in 2008.

It was then that, after decades of authoritarian rule under Mr. Mugabe, one of the African continent’s most promising and productive nations was reduced to economic ruin. In the country once seen as the breadbasket of southern Africa, agricultural and banking sectors collapsed as the monthly rate of inflation topped out at 79.6 billion percent in November 2008. A single U.S. dollar at one point was pegged at 2.62 billion Zimbabwean dollars.

The government stopped issuing the Zimbabwean dollar in 2009, but the economy has never fully recovered from the financial shock.

Unemployed and underemployed rates remain high, and three-quarters of Zimbabwe’s almost 15 million people are living under the poverty line and can barely afford necessities.

In light of that weakness, private economists were warning that it was too soon to transfer away from stable foreign currencies like the dollar to an untested national currency.

Felix Chari, a lecturer in commerce at Bindura University, said the absence of real structural reforms and the treasury’s decision to abandon the multicurrency regime will put significant inflationary pressure on the economy.

“It’s premature to reintroduce the Zimbabwe dollar without instituting sound macroeconomic fundamentals required in stabilizing Zimbabwe’s economy,” he said. “The Zimbabwean dollar is vulnerable to inflation due to low levels of productivity and exports. Inflation will continue to rise as the Zimbabwean dollar devalues.”

On the streets of Zimbabwe’s capital, that is already evident.

After the government’s ban on transactions in foreign currency, some businesses reacted by immediately hiking the prices of goods and services. They argued that their costs were higher because they were importing most of the raw materials and other finished products such as washing powder, tea bags, flour and leather.

The price hikes are taking a toll on even those who are employed. Many struggle to pay their bills on low salaries.

Obert Masaraure, a teacher and leader of the Amalgamated Rural Teachers Union of Zimbabwe, said he is not able to make ends meet under the new currency regime. He earns about 400 Zimbabwean dollars a month, worth U.S. $50 on the black market.

“As teachers, we are now [unable] to go to work” because of the costs of getting there, he said. “And now we are failing to take care of our families.”

Local vendors say they are struggling, too.

“People have limited access to the Zimbabwe dollar, so business is now very low compared to previous days when we were allowed to transact in foreign currency,” said Droba Moyowatidhii, 39, a shoe vendor in Harare.

When Zimbabwe banned foreign currency transactions, its foreign exchange reserves were already drying up. Some now worry about importing essentials such as electricity from neighboring South Africa.

Naome Chakanya, an economist with the Labor and Economic Development Research Institute of Zimbabwe, predicts increasing instability and a booming black market in the near future.

“Most economic activities are going to go underground, and what that means is that all these transactions are not going into official market,” she said. “This makes people lose confidence and trust in authorities and the economy as policy changes are being made abruptly without any [feedback].”

Going underground

Mr. Dembedza, the leather goods merchant, and other business owners say they are already using the parallel, underground currency market to obtain American dollars and other foreign currency to stay afloat.

The end of the Mugabe regime has not brought the political normalcy that so many crave. The Movement for Democratic Change, the main opposition party, refuses to recognize Mr. Mnangagwa’s narrow reelection win last year.

Tendai Biti, a former foreign minister and now deputy president of the MDC, called the introduction of the Zimbabwean dollar illegal and predicts it will be a disaster for the country.

“We do not have reserves that are necessary to support our local currency,” said Mr. Biti. “The currency is subject to political confidence, and this country suffers from a [complete lack] of that. The foreign exchange ban is a disaster, [and] Minister Ncube must repeal it.”

Many locals agree.

Jason Mukono, 33, a government employee, said he now has nothing to deposit into his bank account.

“I don’t go to the bank anymore because the few dollars that I earn as a monthly salary are not enough to buy me food for one week,” he said.

He said he is borrowing money from friends to stay afloat and to get to work. “When payday comes, I only go to the supermarket to buy a few essentials, and then the money is gone,” he said.

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