Ndamu Sandu/Ngoni Chanakira
THE out-going Reserve Bank of Zimbabwe (RBZ) governor Leonard Tsumba says Zimbabwe’s dollar is now worth a paltry two cents from its 1995 levels due to hyperi
The country’s inflation has steadily soared from 15,5% in 1990 to 269,2% today.
Addressing journalists last week, a day before he left the powerful position to take early retirement, Tsumba said: “Due to the sharp rise in inflation, a dollar in 1995 is now worth just under two cents today.”
This is the second time that Tsumba, while discussing the introduction of new notes, has commented publicly about the “true value of the Zimbabwe dollar”.
On August 10 2001, while introducing the $500 note and $5 coin, Tsumba revealed to the media that Zimbabwe’s dollar was worth only six cents from its 1990 level. Again he blamed inflation, which he said had “significantly eroded the value of money in circulation”.
Tsumba last week came under fire from banking chiefs, who accused him of failing to firmly tackle Zimbabwe’s fiscal problems during his 10-year stint in the prestigious post.
The sentiments were expressed as Zimbabwe faces its worst shortage of notes, which has resulted in commercial banks and building societies “buying” money from the “black market”.
Tsumba said the growth of an underground economy, which was a sign of waning business confidence and a reaction to the resurgence of administrative controls, had starved the banking system of cash.
He said the growth in currency demand had occurred against a background of sharply pronounced contraction in the economy which had been on a recession since November 1997.
Tsumba said as a result of this growth, large sums of cash were now being kept in homes and business premises.
“This phenomenon is suggestive of disintermediation, a situation where significant proportion of financial transactions take place outside the banking and financial institution,” he said.
Tsumba took over from Kombo Moyana on August 1 1993.
He steered the RBZ through the days of the Economic Structural Adjustment Programme, the short-lived Millennium Economic Recovery Programme, the National Economic Recovery Programme, and the latest government offering – the New Economic Revival Programme.
During his RBZ stewardship Tsumba witnessed Zimbabwe continuously default on major payments – especially to the International Monetary Fund and World Bank, resulting in the country being suspended from receiving much-needed balance of payments support in late 1999.
The out-going governor has been accused of turning a blind eye on government’s fiscal indiscipline. During his last days in office he dished out an average of $28,8 billion weekly to the cash-strapped government, culminating in Zimbabwe’s domestic debt skyrocketing to $354,1 billion as at March 21.
Tsumba presided over Zimbabwe’s foreign currency payment arrears now amounting to US$1,5 billion, up from US$700 million in 2001, and a balance of payments deficit on its current account of more than US$800 million.
Last week he attributed the shortage of notes to speculation, saying individuals were now carrying large sums of cash.
He said as measures to arrest the shortage of notes the RBZ would inject $24 billion, all in $500 notes, from the middle of this month.
Meanwhile, jockeying for the top post has already heated up with Zimbabwe Financial Holdings boss Elisha Mushayakarara being tipped to replace Tsumba.
Mushayakarara is a former Finance and Economic Development ministry permanent secretary.
Other names being bandied about for the top post are Jewel Bank boss Gideon Gono and the current acting governor Charles Chikaura.