Michael Joordan who used to be the CEO of FNB recently spoke of Zimbabwe’s ever-rising inflation and what the country can do to address these problems.
Joordan blamed the government and its bad choices for putting the poor in a compromising position:
Inflation forces the poor to spend their income on basic necessities such as food and shelter leaving little to invest in education or acquiring inflation resistant assets.
Once again the poor are overwhelmingly being made to pay for their bad government. Those who hold real assets like land or currencies that are trusted are not affected.Michael Joordan
Mr Joordan suggests the adoption of a stablecoin (a stable cryptocurrency) could help with some of the economic problems:
One of the major benefits of cryptocurrencies is that they are governed by mathematical algorithms rather than by humans who decide how much money to print.
We know exactly how much Bitcoin has already been created and how much will still be mined. We have no idea how many Zimbabwean dollars will still be mintedMichael Joordan
Whilst there may be a level of certainty regarding how many coins can be created the volatility of crypto’s (Bitcoin in particular) show that it’s not as simple. This would probably be managed by the fact that stable coins can be backed by currency, assets or other commodities.
A Zimbabwean stablecoin would have to be backed by something other than the Zim Dollar since the regulators in charge of that have previously proved untrustworthy with printing machines.
Jordaan admitted that adoption of a stablecoin is unlikely and he felt that the next best outcome would be rand adoption:
Sadly, the best we can hope for is that they follow a more conventional approach and adopt the currency of their largest trading partner, South Africa’s Rand as their de facto transacting medium.
This would at least reduce inflation in Zimbabwe to the 3 – 6% range and enable economic growth to rescue Zimbabwe.Joordan
The likelihood of Zim adopting a stablecoin is extremely slim considering the central bank is not necessarily a fan of cryptocurrencies and the Zim Dollar is well on its way.
There are also considerations to make regarding the rural population (which outnumbers urban population); how would they access this stablecoin? There are a lot of things to consider in order to assess just how good of an idea this is overall.
More unsettling however is the fact that due to the government’s approach to policy, even if the government adopted a stablecoin, they would probably botch the announcement – leaving citizens to figure out how that would work too.