Bond notes: Beginning of the end

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HARARE – You can have any currency you want as long as it is in bond notes — this is most likely to happen in Zimbabwe in the near future as the economy runs out of steam.

It once happened to me with Air Zimbabwe where they offer you chicken or beef, only to tell you once you have chosen to have beef that they only have chicken.

Any country that does not repay its debts or have its own currency or a vibrant productive sector can never be a viable economic proposition.

No country that decimates its middle class and is mired in corruption and patronage can ever expect to survive. No country that makes heroes of corrupt thieves and charlatans can ever build confidence to attract investments.  A country that does not respect private property and the rule of law can never create value. Zimbabwe is such a country.

The measures announced by the Reserve Bank of Zimbabwe (RBZ) governor John Mangudya last week reflect a country which is in a desperate economic situation with nowhere to go.

It’s really a case of back to the future where Zanu PF is trying to run an unproductive economy through monetary policy measures. Clearly they have not learnt from the era gone by.

As the PDP we have always said that the Zanu PF government has no solutions and has run out of ideas on how to take Zimbabwe out of the economic rut which they have manufactured.

The claim that they are embarking on economic reforms is a big lie. All economic indicators reflect a country in distress and a mere increase in local money supply will not lead to any economic growth.

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Zimbabwe’s economy will have negative growth this year because we are not producing enough to meet our needs. That is the fundamental problem we have to address and nothing else.

We are also not attracting the necessary investment capital due to the confusion created by the Indigenisation Act which is now being left to President Robert Mugabe to interpret for us as he sees fit from time to time.  This is creating inconsistency and a crisis of confidence whose impact will now be exacerbated by the actions of the Reserve Bank.

Zimbabwe is effectively going backward to foreign exchange and import controls but again we are using the wrong instruments.

Controls at most times have the opposite effects as intended because people hate them and will create alternative means to avoid them.

If you restrict withdrawals or impose conditions on export earnings people will just stop using the banking system. It’s as simple as that.

However, the most dangerous thing we face will be the ability of the RBZ to print bond notes which will be allegedly backed by a foreign exchange facility.

From past experience we all know that Zanu PF has no scruples and there is a very real and inevitable temptation to print more bond notes as the economic situation deteriorates further and export earnings dwindle.  This is exactly what led to the collapse of 2008.

As PDP we must say it again, the Zanu PF government has run out of space and must resign and be replaced by a transitional authority which immediately puts in measures to arrest the evident decline and begin to rebuild confidence. Without that, we may as well forget any economic recovery in the short-to-medium term.

The end is near and not even the RBZ can stop the inevitable collapse of what has been monumental failure by a dictatorship whose time to go has arrived.

Another Zimbabwe is possible!

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