WHEN the so-called new dispensation came into being, effectively following the 2018 general elections, it moved with speed to re-introduce the Zimbabwe dollar which had been driven out of circulation by runaway hyperinflation in February 2009. Following the 2009 dollarisation, a basket of foreign currencies was introduced for local transactions which effectively rendered the Reserve Bank of Zimbabwe (RBZ) redundant. And when the Zimbabwe dollar was re-introduced mid-last year, we were told that one of the main reasons for its recalling from the wilderness was to re-establish the RBZ’s role of “maintaining domestic money supply at levels consistent with the increase in the overall economic production under conditions of low inflation”.
While all local trade in foreign currency was banned last year, it is, however, quite curious that the RBZ and government keep allowing more and more State entities to charge their goods and services in foreign currency.
Despite government blocking everyone from trading in foreign currency and fervently dismissing, at every turn, suggestions for the country to redollarise because dedollarisation is proving difficult, is it not a misnomer that the very same government is currently at the forefront of re-introducing foreign currencies in local trading among its entities?
A recent case in point is the greenlight that has been given to the National Railways of Zimbabwe to start charging in foreign currency all exporting companies using the rail transporter’s services. One would have imagined that the RBZ’s ability to keep a tight control on foreign currency earnings at this critical moment in time would significantly help re-establish the central bank’s role. If more and more entities keep being allowed to officially trade in foreign currency, will this not eventually open up the floodgates, given that many people in the country did not really stop using foreign currencies in local transactions? Honestly, how will the RBZ be able to monitor all those it has allowed to trade using foreign currencies?
This is embarrassingly exposing government’s knack for policy inconsistency which has dogged it for years, resulting is investors fence-sitting. It remains to be seen how government will be able to justify itself in allowing others to trade using foreign currency, while denying others in a country which is importing virtually every essential commodity. Sooner or later the cookie will crumble, if it has not already, given that the RBZ appears no longer able, or could not be least bothered to control currency matters in the country.