PEOPLE’S PARTY – PRESS STATEMENT
Government yesterday announced yet another policy change, ostensibly to address the inefficiency of the foreign currency interbank market and stabilise the exchange rate.
The new “managed float” exchange rate regime will see government attempting to stabilise the rate by buying and selling foreign currency in competition with the market.
It is immediately apparent that the policy will not work because the country has no foreign currency reserves with which it could intervene in the market to defend the Zimbabwe dollar.
With just two weeks of import cover, the authorities know they are in an impossible position, yet they insist on prolonging the suffering of the people of Zimbabwe by carrying on their currency charade. It is time to redollarise.
The fundamentals are simply not in place for Zimbabwe to sustain a currency. The authorities are well aware of this but are just buying time. It is inconceivable that government was not aware that the 1:1 policy was unsustainable, but they carried on, depriving exporters of their earnings, until mines began to shut down.
They then devised another cunning scheme though the interbank market where exporters continue to lose money. While parallel market rates are at Z$41 against the greenback, government is robbing exporters and giving them Z$18.
Production is essential for import substitution and the concomitant reduction in the amount of local currency in the market for foreign currency. Government appears to believe that it can somehow defend a currency without production.
Similarly, the authorities conduct their affairs through the use of compulsion and brute force instead of instilling confidence through transparency and policy consistency. This thuggish approach to government undermines currency stability.
The government has been aggressively printing money to support expenditure despite claiming to have a surplus. This growth in money supply invariably leads to a weakening of the currency.
Unless the aforementioned fundamentals are addressed, the currency will continue to slide. The government has competent economists in its employ and is well aware of these facts, but it continues to play games to hoodwink the population and buy time.
Given the present circumstances, it has become impossible for business to make any meaningful plans using the ever-weakening local currency. The only solution is for government to restore the multi-currency system and allow the market to freely trade and establish the value of the local currency.
Government is unable to do this because it does not have the support of the international community and thus cannot provide the social safety net required while the economy realigns itself to the free market.
The international community has been clear about the need for political and economic reforms before any financial assistance will be extended to Zimbabwe. The Zanu PF government has rejected this hand of friendship, preferring to protect its political interests at the expense of the wellbeing of the people of Zimbabwe.
This cannot be allowed to continue; we will not allow it to continue.
Department of Information and Media
12/03/2020