Zimdollar: The writing is on the wall

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The United States Agency for International Development’s food security watchdog, the Famine Early Warning Systems Network, reported a 20% increase in the price of bread and cooking oil last month. .

This is happening amid steady increases in the prices of goods and services as businesses scramble to maintain the value of their goods or facilities. Wages and salaries can barely keep up. The situation has become like a dog chasing its own tail.

The rate at which the Zimbabwean dollar – bonds, RTGS dollar or whatever the authorities call it now – is depreciating simply shows the complete collapse of the local currency.

At the start of this year, the official exchange rate stood at US$1 for $108.66, which has now depreciated to $116.65 in the auction market while in the leafy black market the rate rose from $200 to $240 against the greenback. .

We cannot invent this. This is happening and consumers are faced with these realities.

So, the question then becomes: why is Zimdollar still in use?

We note that the bosses of the Treasury and the Reserve Bank of Zimbabwe say that there are not enough US dollars in the market.

They even reported that the total foreign exchange earnings for 2021 were US$9.7 billion.

Additionally, these same authorities tell us that as of November 2021, there were approximately US$1.5 billion in banknotes and coins in circulation, US$1.7 billion in nostro accounts, and US$1.2 billion Americans to the central bank in reserve currency. .

This means, according to their logic, that Zimbabwe has enough US dollars.

So, again, why is Zimdollar still in use when it’s clear the market has rejected it? Why not just re-dollarize?

Well, maybe it could be because the market doesn’t trust government and probably never will until the big cats are arrested for corruption and poverty is seriously addressed.

Unfortunately, when people raise these questions, the government “unleashes the kraken”, as in the popular American movie, Clash of the Titansin which Zeus unleashes a monster on civilians for daring to stand up to him.

In the case of Zimbabwe, ‘kraken’ refers to security agents in the form of police, central intelligence officers and soldiers to brutalize civilians unhappy with their lot under this administration.

This is why when the current government took over in a military coup in November 2017, the system sacrificed something much bigger, democracy.

This is because if there was a democracy, the government would understand that the economy has completely rejected the Zimdollar. Zimbabwe will no doubt perform better as an economy with its own strong and stable currency, but the fundamentals to enable this are lacking and the government has sidestepped the issue of reforms out of political expediency.

No one wants a currency that changes in value by the minute and even the government itself does not trust Zimdollar. This is why it indexed local tenders to the parallel market exchange rate for its services.

Revenues are losing value, prices are skyrocketing, people are starving at home, and businesses are demanding US dollars or giving them deep discounts, so the writing is on the wall.

The auction market is a joke, except for the few people connected who profit from it.


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