“If at first you don’t succeed, then dust yourself off and try again,” go the lyrics and all my millennials have the song playing in their minds right now.
It appears Aaliyah spoke to older generations too because the Zimbabwean govt announced some new currency measures. Apparently, there is a structured currency on the way. Talk about the art of dusting yourself off and trying again.
The govt is not hiding its head in the sand this time around, they admit that there is some work to be done. In Zimbabwe, we have had the govt deny what we saw with our own eyes. A good example being the 1:1 days, where the govt maintained that the ZW$ was equal in value to the USD.
The govt still does his to some extent, maintaining that the bank rate is the correct exchange rate when the parallel market screams otherwise.
Anyway, this time around the President admits that:
- inflation is out of control and prices are rising wickedly
- the foreign exchange is unstable beyond belief
- the ZW$ is losing value like it’s in style
- Zimbabweans are not saving any money
The govt has a number of measures that they believe will sort it all out. In fact, the President says “a raft of measures” so plan accordingly.
The end goal is the stability and growth of our economy and the President says this can be achieved in two ways – crafting prudent fiscal and monetary policies and promoting a conducive business environment.
Promoting a conducive business environment should be easy but alas, Zimbabwe still hasn’t gotten it right. It goes even beyond high taxation, unpredictable policymakers, high inflation, shortage of forex etc. We get even the small things wrong.
Now, what can we say about currency reforms in this country? We have seen it all. We are a case study for Economics majors across the world. While the results have been terrible, you can’t fault Zimbabwe for the audacity of trying new and novel currency reforms.
President Mnangagwa said,
We shall soon be announcing the introduction of our structured currency
When he said that, Zimbos said “Oh, a structured currency, will that work?” Inside they were screaming, “What on God’s green Earth is a structured currency?”
We all must have bunked the particular Economics lectures where they talked about structured currencies. We turned to Google and even the big G tapped out.
That’s because there is no such thing as a structured currency in the sense that we would think about it. We dealt with bond notes that were classified as a quasi-currency and so were quick to think along those lines when we heard about the soon to be introduced structured currency.
I believe the structured currency he speaks of is the Central Bank Digital Currency (CBDC) that the Reserve Bank of Zimbabwe (RBZ) has been working on.
Short timeline of the RBZ on CBDCs:
- The RBZ first let us know that they were looking into CBDCs back in 2021.
- In the Mid-Term Monetary Policy Statement of August 2022, the RBZ said it had conducted study tours to countries that are advanced in CBDC endeavours and had developed a roadmap for adoption of CBDC in Zimbabwe.
- The RBZ released a consultation paper on CBDCs, inviting dialogue from the public.
- Later that same year, 2022, the RBZ carried out consultations and ran a consumer perception survey
- In early 2023, the RBZ was still inviting input from the public on the CBDCs
We talked extensively about CBDCs before but here is the gist of what that is.
CBDCs are the digital form of a nation’s currency. The Reserve Bank RBZ) would issue, regulate and control the CBDC.
It is not a new currency. Rather, we would be introducing a digital token/virtual form of the RTGS$. So, it is backed by the full faith and credit of the RBZ, whatever that’s worth.
Ah, and there goes the excitement and/or fear. The structured currency is more of the same, whatever plagues the RTGS$ will also plague the CBDC because they are essentially the same thing in different forms.
You can dig into what CBDCs are all about here: Zim govt looking at central bank digital currency, what is that and why won’t it fix our problems
It could be something else
The structured currency remark could just mean currency reforms like changes in currency denominations, the introduction of new security features, or adjustments to the monetary policy framework.
Or maybe the President is talking about adjustments to interest rates, inflation targets, or foreign exchange policies as bringing structure to our currency.
Another possibility is that we will be pegging our currency to another currency, to stabilise exchange rates. I really hope it’s not this. We tried pegging our currency to the USD before and it didn’t work.
Or the Zimbabwean govt really is introducing a new currency. One not tainted by the failures of the ZW$ and RTGS$. I don’t think this will work either because the fundamentals are not right for the introduction of a new currency. It would just fail.
Anyway, it’s only a matter of time. We shall know what’s what soon enough when we start using the new structured currency.