There Is More To An Economy Than The Value Of Bond Notes


My colleague has already delivered his rebuttal to Mr Eddie Cross’s claim that the bond note is the strongest currency in Southern Africa. In this article I am going to deliver my own rejoinder to the assertion by Mr Cross that because the bond note is stronger than all the other currencies in this region all is well in Zimbabwe.

What he said

The underlying economy actually is fine, it’s growing, exports are growing and the fundamentals are strong and this was reflected by the fact that by Christmas the rate to the RTGS (Real Time Gross Settlement) Dollar had come down to 2,83.Now at 2,83 everybody has got to understand that the bond note is the strongest currency in the SADC region, because it is a currency, and this indicates the underlying strength of the Zimbabwe economy despite the problems.

Why I think his argument holds no water

When people talk about the economy they are referring to Zimbabwe’s macroeconomic environment. Here we will be talking of the economy in its entirety not to just specific sectors. The health of the economy is gauged by a number of indicators which have to be taken as a whole. These factors include of course the strength of a currency but we also have to look at things like:

  • Gross Domestic Product (GDP) i.e. the value of goods made in a certain country in a given year
  • Inflation i.e. changes in prices of goods
  • Employment
  • Spending levels/Amount of disposable income available
  • Monetary policy
  • Fiscal policy

Not long after taking the reins, Mr Mthuli Ncube claimed that Zimbabwe had been under reporting its GDP and proceeded to “rebase” it to a $25 billion. Considering how we are importing everything I think the dear Minister and his masters simply cooked the books. If you do not believe me walk into a supermarket right now and see how many  of the goods on the shelves were made in Zimbabwe. Even the matches and needles are imported.

The strength of a currency means nothing when its value is volatile. The volatility of the bond note is more than enough proof that our economy is sick and in need of urgent attention which it is not getting from our government which continues to ignore the prevailing currency crisis.

In fact my as my esteemed colleague has so eloquently argued the trouble with the bond note is that it is technically not even a currency at all! So how can it even deemed the strongest currency when it fails to tick the currency boxes not least of the fact is that you cannot trade it outside Zimbabwe.

Back to the volatility issue, because of lack of trust in our government the bond note has been on a free fall. Every time the government announces a policy change the bond note takes a tumble. Case in point after the fuel price hikes the rate has now risen to $4 RTGS. The government speaks and the bond falls. Its so volatile it makes the Rand(the second most volatile currency in 2018) and the Turkish lira look rock solid.

Then there is the issue of inflation. Officially inflation is in the 40% region. This rate is calculated using official prices of goods i.e the prices at which things like bread are supposed to be sold at not the actually prices that some of us have to pay in order to get bread. Officially bread costs $1.40 in reality you will have to pay $2.50 almost twice and much.

Most economies agree that once inflation reaches and passes 50% it should now be deemed hyperinflation. The government has thus been again massaging the books to make sure that we don’t get into the hyperinflation territory. Unofficially there is hyperinflation in Zimbabwe.

Given all this, it is quite ridiculous for Mr Cross to understate the problems we face and speculate that all will be well soon. Whatever light he is seeing at the end of the tunnel is the proverbial train coming to steam roll us all and send us back to the hell that was 2008.

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