HARARE – Our Staff Writer Blessings Mashaya speaks to the opposition MDC shadow finance minister Tapiwa Mashakada on bond notes.
Q. What is the likely impact of the current cash crisis the country is grappling with given concerns from some quarters that government shoved the bond notes down people’s throats without consulting?
A. The currency crisis, if not addressed, will be the powder keg of political and economic instability in Zimbabwe. Ideally, the Reserve Bank of Zimbabwe (RBZ) should have first presented the issue before the Parliamentary Committee on Budget and Finance, which in turn would have sought the views of the public on this important national development.
Moreover, the RBZ neglected to consult the Tripartite Negotiating Forum (TNF), which is the cog of a social contract in Zimbabwe. In the circumstances, government should just take heed of the dissenting voices of the generality of the masses.
Q. And what is the likely impact of that decision on the economy?
A. If the government wishes to commit the ostrich’s offence and proceed with bond notes, the market will reject its usage as legal tender. The political and economic consequences will be dire. Bond notes will trigger another black market of foreign exchange.
Q. Can you shed more light on how this will likely trigger the black market?
A. Government will be tempted to print more bond notes, thereby triggering price hikes and intimately hyperinflation.
Q. That sounds scary. It rings a bell of the 2008 scenario where companies where unable to import. Will this be the same scenario?
A. Imports will be hamstrung as importers have to apply for foreign exchange and import licences, a thing which had stopped in 2009. Government is unwittingly turning back the clock to 2008. Zimbabwe imports 60 percent of its goods from South Africa compared to exports of 40 percent.
While bond notes will reduce the trade deficit which now stands at $3 billion, the unintended consequences include a slump in domestic production which will lead to empty shelves, fuel and food shortages. We have walked this road before.
Q. What will be the choices available to Zimbabweans in that case?
A. Printing of Zimbabwe dollars disguised as bond coins and their circulation alongside the US dollar is known as “partial de-dollarisation”. The market will be faced with two choices — Zimbabwe dollar and foreign currencies. In practice, there is no choice. It’s a one-way decision. The market will go for the greenback, stupid!
Q. What is partial de-dollarisation?
A. Partial de-dollarisation was attempted in Latin America by countries that had, like Zimbabwe, previously dollarised. Examples are Bolivia, Costa Rica, Ecuador and Chile. The moment they started partial de-dollarisation, imports fell and this was followed by price distortions and capital flight.
Q. How about in our case?
A. In our case, partial de-dollarisation will lead to unintended consequences such as shortages of basic commodities and hyperinflation.
Q. You have a labour background, having been in the trade union movement, what is the likely impact on labour?
A. Workers will start to go for short-term wage agreements in order to keep pace with the purchasing power parity of bond notes. With such a scenario, riots will begin and there will be socio-economic strife in Zimbabwe.
Q. This perhaps brings us to the political impact, can you say more on the likely result of this move on the political front?
A. Government will respond with brutal force which according to Karl Max is the midwife of a political revolt.
In order to avert all this, government should shelve its bond notes plans and go back to the drawing board.
MDC is working on a national convergence of ideas to seek for a long-lasting political solution to Zimbabwe’s economic quagmires.
Zimbabweans are not short of ideas. We have proffered many alternatives to government on how to increase liquidity.
The first thing is to restore confidence by scrapping the Indigenisation Act.
This will encourage FDI flows and increase the supply of the US dollar.