Instead of trying to prop up the failed bond notes and dollarization system, South Africa’s Finance Minister, Tito Mboweni thinks Zimbabwe is better off introducing a new currency.
I think the idea of using a new currency in Zimbabwe is a good one. I think our colleagues there are on a good wicket when it comes to that space. We are working together very well but at the end of the day it is Zimbabweans who need to fix their country.
His remarks indirectly concur with Finance Minister, Mthuli Ncube’s plan of introducing our own currency in 12 months’ time. Holding other things constant, a new currency might better Zimbabwe’s fortunes because much of its current economic woes seem to be as a result of a currency crisis that started a few years ago.
Although some economists and public figures think it wise to have a new currency, I think the average Zimbabwean is not sold on the idea because they don’t trust the government on money matters. The mistrust stems from the fear that the government could repeat what it did decades ago when it was short of funds- the government simply printed new money which consequently led to inflation that ultimately left people holding worthless Zim dollars.
Now the problem is that when people are skeptical and not confident with the government’s new currency, the currency won’t be used as a store of value since people spend it relatively as soon as soon as they receive it in the fear of ending up holding worthless papers. And if people are spending everything they are earning then there will be no savings which are used for investments and investments that are, in turn, to stimulate production.
Despite this speculative and gloom outlook, having our own currency will enable the government (and the Reserve Bank of Zimbabwe) to tweak the monetary policy to produce positive effects on the economy. Imagine if Zimbabwe had its own currency, would we be having these shortages of hard cash that have bred currency black markets that are ultimately causing inflation? Obviously not, the RBZ would have simply increased the money supply and get rid of currency shortages. So Tito Mboweni and Mthuli Ncube may be right, having our own currency will solve our economic problems.