By Dr Tapiwa Mashakada, MDC Secretary for Policy and Research

“To Be or Not to be. That is the question”. William Shakespear

In the United Kingdom, there is a County called Warwickshire. The University of Warwick is in this County. But in England Warwickshire is otherwise better known as Shakespear’s County. Indeed it is the birthplace of the poet and playwright William Shakespear, the wordsmith.

In his book HAMLET, Shakespear asks a rhetoric question: “To be or not to be-thats the question”.

Today, like Shakespear we can all pontificate on our present ecoomic/currency crisis and as Shakespear did, raise our own rhetorical question as follows: “To dollarize or not- that is the question”.

In my view, re-dollarization is inevitable because the market has completely rejected the fake reintroduction of the so-called Zim dollar and instead the market has continued to index prices of goods and services in usd. In fact most retail outlets, shops, fuel stations, schools, hospitals, pharmacies, you name it, are either charging in usd or indexing. What we see as the price madness is all about indexing prices to parallel market rates which the regime is battling to tame.

During the week ending 20th September 2019, the parallel market closed at 1:25 before gvt descended on some named companies and froze their accounts leading to the tumbling of parallel market rates to as low as 1:10. But the question is: Can the forex market be determined by arrests or punitive measures. The answer is a big No. The forex market must be a free float. Hazvidi demo (you cannot use an axe) as it were to slush down parallel market rates. It is wishful thinking. We must not deal with symptoms.

The currency- cum exchange rate crisis has gone out of hand. Hyperinflation makes the situation worse. Prices of basic commodities are out of this world. The last year-on-year inflation rate was recorded in June 2019 at 175%.

The regime announced it would no longer publish annual inflation figures due to the break in time series data from the dollarization era to the Zim dollar era. The data is soft. But Professor Hanke continues to measure the Zim inflation. His latest figure is 745%. This is frightening.

Under such galloping inflation, the only option is to adopt a stable currency, which is the usd. According to Prof Hanke, the Rand is volatile and prone to frequent cyclical depreciation against the usd.

Money has among many functions, two nost important functions. Money is a store of value and a medium of exchange. With due respect a currency depends on confidence. At present, the market lacks confidence in the Zim dollar. In fact, as usual, gvt bungled when it prematurely annoumced the instant return of the Zim dollar when in fact gvt was not ready to introduce it. It was a false start. Hence in this regard, the reintroduction of the Zim dollar was a dump squib. It is a still birth as there was no new local currency issued. The bond note and rtgs remained the only legal tender. That even killed public confidence the most. Instead, gvt should have demonetized the bond and rtgs, print and gazette new Zim dollar notes and coins(base money) with particular features. That did not happen. Iam not by any means suggesting that the reintroduction of the Zim dollar was going to work. Far from it. I am on record arguing that the right macro-economic fundamentals must be in place.

What makes it necessary now to redollarize? The following reasons are most compelling:

1. No one has confidence in the Zim dollar anymore
2. Economic agents are still charging in usd or indexing prices to the parallel market exchange rates.
3. The log-it or lagged effect of rtgs denominated Treasury Bills are still driving money supply growth in the economy and monetary targeting has failed to chlorinate or sterilize the effects of deficit monetization.
4. Prices of goods and services are sticky downwards. Pundits of neo-liberal economics (like Prof Mthuli Ncube) think that one day there will be some imaginary competition that will drive prices down. Such thinking is Utopian and academic. Look at what happened in the week ending 20th September. Even though paralllel market rates fell drastically after the arrest of money launderers, prices did not fall in sympathy. Instead prices of commodities continue to rise and the poor are fèeling the pinch. Society has become more unequal and Zimbabweans are now trapped in poverty. But the sharks are happy. They can hedge themselves against inflation through forex trading and acquisition of Assets. The poor civil servants are wallowing in poverty. Pensioners are the worst. The economy is in a state of implosion. The wheels have come off. In order to abet this economic genocide, the gvt must without much ado, redollarize immediately within this side of 2019. Continuing with the bond and rtgs beyond December 2019 may precipitate social and political mayhem as citizens are losing patients. In fact the Currency crisis is itself a security threat. And so is the economic genocide propelled by price increases. People are dying in hospitals because firstly there are no drugs and secondly they cannot afford to buy from private pharmacies.

The recently appointed member of the Monetary Policy Committee, Eddie Cross opined that Zim earns about usd13.6bn per year in foreign currency inflows from exports of gold, tobacco , diaspora remmittances and other flows. If he is correct, then Zim has more that the 40% forex required as currency in circulation to underpin the reintroduction of the usd.

The rand has got issues with Rand Monetary Area and SACU rules. Moreover all the Member states have to agree on the admission of a new member.

Therefore, the only option for Zimbabwe is to redollarize. The Zim dollar is a debauched currency which cannot be used as a store of value.

Redollarization will solve the following:

1. Stabilize the economy and wipe out hyperinflation
2. Redollarize will stop the black market caused by the surrogate currencies
3. Redollarization will bring back confidence.
4. Redollarization will stop gvt borrowing and result in a cash budget
5. Redollarization will flush out cash barons and reverse corruption, clientelism and state capture.

Let there be market confidence. Let the usd return now and not later. I rest my case.