AT the rate at which the Zimbabwean dollar (Zimdollar) is losing its intrinsic value, it may just be a matter of time before the country re-dollarises, officially or unofficially.
Those pushing for dollarisation are arguing that its adoption would stabilise the country’s tottering economy and create room for our quarrelling politicians to put their houses in order.
What they, however, seem to forget is that our politicians, especially those in the governing Zanu PF party, actually flourish under chaotic conditions, which favour the ruling elites who thrive on arbitrage opportunities that become plentiful whenever our markets fail.
Critically, Zimbabwe has insufficient foreign currency (forex) in circulation, accounting for perhaps less than 30% of money in circulation. The remainder is the local currency, namely your bond notes and balances in the Real Time Gross Settlement (RTGS) system.
To push for dollarisation under the circumstances, when it is as clear as glass that the economy barely has the forex liquidity to energise business, is no different from attempting to run a marathon as if it is a sprint race; you will burn out.
The best option for a country is always to use its own domestic currency, which gives it more policy options to stimulate growth. The rise in nationalism across the world is testament to the need to put our destiny in our own hands, whilst being part of the global community.
This calls for decisive action in defending the troubled Zimdollar, including stamping out widespread indiscipline which is fuelling parallel market rates and causing prices of basic goods and services to rise beyond the reach of many.
As much as it is pleasing to see the authorities putting effort in the fight against the devastating Covid-19 pandemic, we expect to see the same vigour being directed towards the implementation of structural reforms to guarantee currency stability. The same goes with the continuous improvement of the ease of doing business as well as initiatives towards import substitution to reduce the import bill, especially in areas where raw materials are locally available.
Why should a country with the highest literacy rate in Africa, rich soils and splendid climatic conditions import maize, soya beans, potatoes, etc, when we can produce these locally to meet demand and export too? What is so difficult with government identifying serious farmers who are capable of feeding the whole country and give them all the necessary support they need on commercial terms?
This should not be confused with advocating for the so-called Command Agriculture which, for lack of a better word, is just another black hole.
Dollarisation is particularly disadvantageous to those in the real sector who need a soft currency to improve their competitiveness seeing that we cannot compete in a hard currency environment.
Against the background of the opening up of economies through the African Free Trade Agreement, Zimbabwean companies need modern equipment to compete, and would require government’s support to re-tool. There has to be commitment on the part of government — backed by a demonstrable trend — to support industry in this regard.
To that extent, the central bank must continue scouring regional, continental and international markets for offshore credit lines, guaranteed by United States dollar revenues earned by exporters while complying with anti-money laundering laws to ensure that correspondent bank relationships are maintained and is able to import cash.
Some payments should also be made towards clearance of arrears with the World Bank, the International Monetary Fund and the African Development Bank to ensure a good credit record. If we could clear the debt with South Africa’s power utility, Eskom, in dribs and drabs surely we can do the same with these and other international lenders to improve our credit ratings.
As part of measures to stabilise the currency market, the authorities must also deal with the high tariffs being charged by the local authorities and parastatals that seem to defy logic considering the atrocious service that members of the public are getting from them.
It needs no rocket science to figure out that the high tariffs are a result of the huge salaries and perks which these institutions are awarding to their top executives, most of whom are pathetic performers.
Somehow, the government has gone back to sleep and is allowing these institutions, which are under its control, to funnel more than 70% of their budgets towards salaries and perks which they unashamedly pass onto the suffering members of the public through extortionate tariffs.
Government must ensure that its institutions — without exception — stick to approved salaries where chief executive officers earn an equivalent of between US$5 000 and US$10 000, based on the performance of the companies they lead.
Their perks, together with those for their fellow executives, must also be regulated so that they do not impose an unnecessary burden on the taxpayer.
Effectively, low council salaries and tariffs will reduce the demand for high salaries in the rest of the economy, especially when accompanied with reductions in school fees across public, mission and private schools.
Just this month, most schools, including private schools, adjusted their fees downwards with some that used to charge US$3 000 now charging US$1 500 or lower in US dollars. Mission schools are expected to come down to levels around US$500 per term. This is the way to go.
The provision by government of more land for housing to civil servants should also dampen pressures on rentals as more and more public workers develop their own houses, release their rented accommodation onto the real estate market, which will pull down rental charges. We must not forget that government is the biggest employer at the moment.
To avoid profiteering tendencies, land should be given to local authorities and not private developers. This is not impossible because councils already have in-house expertise to develop land and construct houses for leasing and/or selling.
At the same time, the adoption of e-government should reduce expenses for government and hence cutting down on its expenditure overruns.
Tied to that, government should also procure directly and avoid middlemen who do not add any value. This should be complemented by timeous payment of suppliers to keep their businesses viable.
While it will be easier to shift blame to Treasury for the hasty introduction of the Zimdollar in June 2019 without first establishing the right fundamentals, the focus now must be on the most viable way forward.
I therefore believe that these and other measures which include decisively dealing with currency manipulators would help reduce pressure on the Zimdollar, which, without doubt, represents our best foot forward at the moment.
Dapi is an economist and development finance expert. He writes here in his personal capacity. — email@example.com