My opinion on bond notes

By The Standard | Nov. 6, 2016

I am not much of an economist, and I ought to have checked this piece with the economists in my circle, but I am so convinced that despite my not being qualified in this field I have some idea of how the fiscal and monetary policies of a country should work.

brand savvy with Stha

I also have a solution that I am convinced would work to remove our country from the doldrums that it is currently submerged in, but maybe let me save that for somewhere towards the end of this article. For now, please lend an ear to my opinion, noting well that I am just a layman.

The Reserve Bank of Zimbabwe governor John Mangudya, almost comic in his approach, asks the people of Zimbabwe to trust him in this move. I read somewhere and I am in total agreement with the statement that those who trust the government, from which the governor gets his mandate, have never read history or have failed it dismally. You see, even the remotest good intention will not work with people who cannot be trusted. Who in their right senses would trust this government after what we have been through as a country? Besides the trust issue, I read with great intrigue the Government Gazette Extraordinary, published on October 31. I am under the impression that the document is quite unconstitutional. It is also my opinion that the Parliament’s responsibilities cannot be delegated at this stage. Given my knowledge of the law is quite minimal but the introduction of the bond notes was something that was supposed to be discussed in Parliament in the generally laid down procedures of passing a law. The Government Gazette Extraordinary then suggests that the president rules by decree, which is not the case, or should not be the case in Zimbabwe. The powers that the president assumed in the bond notes issue are unconstitutional.

A bit of research and consultation with people whose opinion I respect and who are not necessarily economists confirmed my opinion. One of the conversations brought out these critical facts. The only time where economic fundamentals support two currencies remaining at the exchange rate of 1:1 is inside a monetary union. This is because the issuer of the union currency is the controller of the monetary policy throughout the union and central banks of the union members are subservient to the issuing institution. The Rand Monetary Union is an example of this arrangement. South Africa, Lesotho, Swaziland and Namibia use the ratio 1:1 for its currencies with the South African rand. The Zimbabwean situation, to quote one of my friends, is “out of the textbook” I rolled over in laughter at this loaded statement. Here was a government wanting two significantly different currencies to trade at 1:1 inside its borders and yet one of them cannot be recognised elsewhere. The interplay between imports and exports will certainly impact the value of the surrogate currency due to its inability to trade internationally. A trader who relies on imports will need to find the United States dollar to replenish their stock once they sell out in bond notes. Chances are very high that the US dollar will become scarce and a premium will have to be paid to acquire it. If this is illegal officially, then a parallel market will arise. There is really no rocket science and there is no need to go deep into explanation as it has happened before in Zimbabwe. It looks like we have come full circle again. It will not be surprising to see the shelves empty again. Shortages and illegal markets will rise again. I do not understand why anyone would want this for Zimbabwe; I do not know what their motivation would be.

Being just a little older than Zimbabwe myself I feel cheated at the number of my years that have gone down the drain. Many people my age have applied themselves in acquiring a solid education and have remained loyal to this land, but still they have nothing to show for it. I foresee it taking another 36 years for this land to heal. How many of the people who are reading this article now have 36 years on their plate? Not one, quite sadly.

I said I have a solution to all these problems, but unfortunately, I am not the final say. I will give the solution anyway in case it has not crossed the minds of some of my fellow countrymen. The solution is that the president and government should accept defeat and go, to save Zimbabwe, the land that they claim to love.

I value the feedback I receive on the column and look forward to further interaction. In the meantime, please keep reading and remain brand-savvy.