Editorial: Regulations will not shore up unloved Zimdollar

Source: Editorial: Regulations will not shore up unloved Zimdollar – NewsDay Zimbabwe December 11, 2019

“IF you destroy a free market you create a black market. If you make 10 000 regulations you destroy all respect for the law.” – Winston Churchill

NewsDay Comment

The above observation made by the late former British Prime Minister is quite apt given Zimbabwe’s current dire economic situation characterised by a thriving black market in everything from hard cash to critical commodities such as fuel. And government’s continued attempts to control the black market through even more regulations is set to further complicate an already entangled situation.

What largely boggles the mind is that government is now making concerted efforts, through the promulgation of more regulations, to stop citizens from trading in the US dollar when it is deeply involved in US dollar trade. Only on Tuesday government announced that it will be charging US$318 to all Zimbabweans in the diaspora needing passports. Also, as we speak, all citizens importing vehicles are paying duty in foreign currency. And, if we recall, not so long ago there were other sectors such as mining which were allowed to pay their electricity bills in foreign currency, highlighting government’s gross policy inconsistencies. Is it now a case of do as I say and not as I do? In practice, it will not work, government should simply walk the talk and transact in the local currency in all its businesses.

Otherwise it will be quite interesting to see how government will go about implementing the regulations that intend to criminalise re-dollarisation, which is fast taking root in the troubled economy. Re-dollarisation is happening just about six months after the banning of foreign currencies in all domestic transactions. Government tells us that it wants to throw its citizens in jail for transacting in foreign currencies to force them to accept the Zimbabwe dollar which is currently being mauled by inflation.

You can take a horse to the river, but you cannot make it drink, so goes a very old adage. And besides, as some economists have rightly pointed out, is it not strange for government to expect citizens to accept and love a local currency which is a scarce commodity, with the available little losing value almost daily? Holding a gun on citizens’ heads will not strengthen the Zimbabwe dollar. It will, in fact, precipitate its demise because there is little to zero goodwill carrying it.

The death of the Zimdollar some 10 years ago came after a painful experience whose relief came via dollarisation, so it was imprudent for monetary authorities to reckon that they would just de-dollarise overnight. And it is even more injudicious for the monetary authorities to think that they will force de-dollarisation through the barrel of a gun when there is nothing to support the continued existence of the Zimdollar in terms of increased local production and healthy foreign currency reserves created by increased exports.

The present administration can craft 10 000 regulations and many more, but as long as all the fundamentals are not right to help strengthen the local dollar, the whole exercise will just be a waste of time and energy.