FORMER Finance minister Tendai Biti has castigated government over its decision to introduce bond notes into the market saying the move would result in externalisation and closure of companies among other dire consequences.
By Kudzai Kuwaza
Biti also warned the proposal in some respects was almost certainly unconstitutional and thus unlawful, and will be challenged in the courts of law.
Reserve Bank of Zimbabwe governor John Mangudya on Wednesday announced the central bank would soon introduce bond notes valued at US$200 million, among several other measures designed to ease an acute shortage of cash. There are, however, fears the move was a subtle way of bringing back the long-discarded Zimbabwe dollar through the backdoor.
“The return of the Zimbabwean dollar marks the gross admission by this regime that it has failed and failed in absolute terms and that it will drag everyone along in the plunge to the abyss that now awaits this economy,” Biti said on his Facebook page.
“It is a cynical, disrespectful and contemptuous move that has absolutely no logic, sense or justification on any rational ground whatsoever.”
He said a national currency at the end of the day is a relationship that captures the country’s productive capacity, adding that it reflects a country’s output and the strength, quantity and quality of its real economy.
“In this regard to the extent that Zimbabwe’s productive capacity is near to zero, it cannot afford as yet to bring back its currency,” Biti said. “The bottom line is that Zimbabwe does not have the requisite export base to support a currency. More accurately the country simply does not have a trade balance to even think of bringing the Zimbabwean dollar.”
The former finance minister noted that the country has a mere US$303 million being amounts left in reserve as Special Drawing Rights by the inclusive government. It “represents a mere four weeks of import cover”.
“The Zimbabwean citizen long ago jettisoned this regime and its currency. It will not accept this new dollar just like it rejected the old dollar,” Biti warned.
“Indeed, the re-introduction of the dollar will have cataleptic consequences to the remaining constructs of Zimbabwe’s pseudo economy. It is a decision that will see many of the remaining companies reach breaking point and simply shut down. Few are prepared to relive the nightmare of the melt down period of 2007 and 2008.”
The move, Biti said, would also trigger a fresh wave of externalisation, under-banking, tax avoidance and evasion.
He added that the directive that 40% of export receipts starting from May 5 will now be converted to the South African rand is “blatantly unconstitutional” and “must be challenged in the courts”.
Biti said President Robert Mugabe’s regime has run out of options faced with fiscal pressures, a ballooning budget deficit that it has so far financed through the issuance of toxic Treasury Bills, which have now reached saturation point.
“The regime has created a huge gap in RTGS balances that have been raided at the central bank. That gap is the real cause of the current cash crises,” Biti said. “Re-introducing the Zimbabwe dollar will allow the responsible thieves to monetise this gap in the new Zimbabwean dollar.”
Bulawayo South MP and economist Eddie Cross said the introduction of the bond notes “would make the crisis a 100 times worse.”
“He has not addressed the fundamental issues affecting the economy. It’s a disaster,” he said.
One economist pointed out that it was ironic that the indiscipline by government which resulted in the decimation of the Zimbabwean dollar had led to the introduction of bond notes without addressing the fundamental aspects of productivity and confidence.
“The government through the introduction of the Zimbabwe dollar is pressing the self-destruct button once again and is hurtling towards a precipice which they cannot wait to get under,” the economist said.
Economist John Robertson said he hoped the strong outcry against the move would stop the government from implementing what he said was “a very bad idea”. The Zimbabwe Stock Exchange had not reacted to the announcement as of yesterday with normal trading reported and the mining index remaining unchanged as news of the bond notes sunk in.