via Govt to bring back Zim dollar — Biti – DailyNews Live by John Kachembere and Roadwin Chirara 18 DECEMBER 2013
Former Finance minister Tendai Biti said yesterday the Zanu PF government would be forced to reintroduce the shelved Zimbabwe dollar next year to avert total economic collapse.
“The sad truth of the matter is that the Zimbabwean dollar will be back. It is not a matter of if, but when,” the MDC shadow Finance minister told a press briefing at the party’s Harvest House headquarters in central Harare.
Zimbabwe abandoned its local currency in 2009 after it had been ravaged by hyperinflation which topped 231 million and introduced a basket of foreign currencies dominated by the United States dollar.
However, speculation has been rife following the re-election of President Robert Mugabe in August this year that the local unit will be re-introduced. Some officials in Mugabe’s Zanu PF party have called for the reintroduction of the Zimbabwean dollar to help ease liquidity challenges in the economy.
Biti said since September, revenues have collapsed and the government cannot meet its wage bill and other obligations.
“The government has been borrowing to pay the wage bill, in the process committing the cardinal sin that you do not borrow for consumption or recurrent expenditure,” Biti told reporters.
“To borrow close to $300 million in a space of 100 days is irresponsible and unacceptable, more so when it is being done behind the back of Parliament.”
The ex-Finance minister, who is also MDC secretary-general, said since there was no Overseas Development Assistance and Foreign Direct Investment flowing into Zimbabwe, it was inevitable that a solution must be found to monetise the domestic debt, which he predicted to be around $1 billion by year end.
“The easy and inevitable solution will be to print the Zimbabwean dollar and unleash the cataleptic energy of the printing press,” he said.
Biti’s comments on the re-introduction of the local currency comes on the back of increased speculation that the Reserve Bank of Zimbabwe (RBZ) subsidiary, Fidelity Printers was of late re-engaging its former employees in preparation to mint the Zimbabwe dollar.
But Fidelity Printers and the Reserve Bank have both dismissed speculation on the return of the Zim dollar.
“As monetary authorities, we wish to assure the business community and members of the public that there are no plans to reintroduce the Zimbabwean dollar in the near future,” acting Reserve Bank governor Charity Dhliwayo said last week.
Finance minister Patrick Chinamasa has said the regime will continue indefinitely but Tony Hawkins, the head of the University of Zimbabwe’s Graduate School of Management said the tightening liquidity in the economy could force a rethink and that there was always the risk that politicians would seek a “superficially attractive” way out to finance campaign promises.
“I suspect — perhaps fear — that the government will opt for some dual currency option,” said Hawkins in a recent presentation of the 2014 economic outlook.
Biti noted it would be difficult to revert back to the local currency under the current economic environment but said government will railroad its return nonetheless.
“It’s impossible to go back to your own currency once you have dollarised,” he said.
“This is because currencies strive on trust and confidence and the Zimbabwean populace have no trust in the Zimbabwean dollar.
“Only Panama in 1904 was successful in re-introducing its local currency after it had dollarised.”
But Biti said the Zimbabwean dollar will be forced on those sectors that cannot afford to resist it such as parastatals and civil servants.
Unfortunately, he said, this risks creating a very disproportionate parallel market.
The lawyer-cum-politician predicted that government would next year fail to pay civil servants due to the ballooning current account deficit.
“What we are likely to see early next year is a new lexicon of staggered payments for civil servants salaries,” Biti said. “This will stem from the fact that at the moment government is struggling to pay
bonuses, which on its own is a criminal offence and unacceptable.
“There has been de facto shut down of government. Line ministries are now starved of resources and have basically ground to a halt.”
Turning to the 2014 National Budget, Biti said Chinamasa would present a fictitious budget considering that there were no resources to fund it.
“In this era of cash budgeting, you don’t plan to present a deficit-financing budget,” Biti said.
“On Thursday Chinamasa will present a Mickey-Mouse budget because there are no resources to back it up. That’s why Chinamasa had initially refused to present it,” he said.