ZIMBABWE must abandon plans to introduce bond notes and maintain the multiple currency regime to avoid economic demise, a top global currency expert has said.
By Taurai Mangudhla
The bond notes, a surrogate currency to be backed by a US$200 million Afreximbank loan, will trigger enormous instability in the economy and see Zimbabwe implode, resulting in chaos and mark the demise of President Robert Mugabe’s regime, said Johns Hopkins University Institute for Applied Economics co-director Steve Hanke.
Hanke, who has conducted a lot of research on Zimbabwe’s hyperinflation which ended in 2008 and one of his most recent books is Zimbabwe: Hyperinflation to Growth (2008), is a senior fellow and director of the Troubled Currencies Project at the Cato Institute in Washington, among other prestigious positions. He served as an advisor to various governments and played an important role in establishing new currency regimes in a number of countries.
So far, Hanke said, talk of bond notes, which he described as an inferior currency to the United States dollar, has worsened the country’s liquidity crisis.
“Zimbabwe will probably implode now, the economy is in terrible shape as everyone knows; it has been mismanaged for decades now and is a complete disaster. I think the introduction of the bond notes, rather than solving any problems, will lead to indiscipline and an implosion of the economy,” he said, adding Zimbabwe’s economic stability is a result of the multi-currency system.
“First of all, government should have never talked about the bond notes and secondly they should never issue the bond notes. When Mugabe signed the papers for the bond notes he signed his death warrant, this might be the end,” added Hanke.
He said Zimbabwe was performing terribly in the World Bank Doing Business rankings, where it is currently in position 161 out of 190 countries, largely due to its policy stance which he described as Marxist.
The only way that Zimbabwe can really improve its global rankings, said Hanke, is by stopping the bond notes issue immediately before it contaminates the currency system while retaining pure dollarisation as well as embarking on major structural reforms.
“To have structural reform, you have to throw away the Communist Manifesto and this will require a complete regime change and a different way of thinking,” said Hanke. “You have got to adopt a free market model. You have an old Marxist model that’s killing the economy and has been killing it for decades and making everyone poor. If you adopt the Communist Manifesto, it’s a formula for making everyone poor.”