President Robert Mugabe recently said the country should think of reviving the Zimbabwe dollar backed by gold saying the US dollar has brought a lot of misery, especially for the rural folk. In this question and answer with Standardbusiness (SB), Gilbert Muponda (GM) who runs an economic, financial, business, research and advisory services firm says reviving the Zimdollar is achievable if the fundamentals are addressed.
SB: Will that currency (the revived local unit) command respect considering what happened in the last days of the Zimbabwean dollar?
GM: It will because it’s about changing the custodian of the currency and back it up with credible economic policies. I am sure you know people lost confidence, trust and faith in central bank governor Gideon Gono due to clear lack of coherent economic policies and the overuse of currency printing to solve every government problem. We need sound economic policies, accountability on mineral income, and predictability on major policies such as property rights. Our currency will be normal if we can achieve that then we run it with other multi-currencies.
SB: Can we talk of reviving the local currency now at a time there are discussions on regional integration that will result in a regional currency notwithstanding the problems happening in the Eurozone?
GM: Eurozone was an ill-conceived idea by the big European powers, Germany and France. They ruined Greece. Greece was a holiday destination competitive with its currency but with the Euro, it lost that and went bankrupt so this regional currency idea is a dubious model. What do you gain by using the same currency with someone in Mauritius or Madagascar? It’s the powerful exporting nations which will gain. Zimbabwe must try to build its institutions; it doesn’t help to join the powerful and organised neighbours when you have nothing to show for it. Where has a single currency ever succeeded and benefited nations except those pushing the agenda due to their dominance?
SB: So, how will this gold-backed/Zimdollar currency work? What will be the fate of multi-currencies?
GM: If Zimbabwe prints Z$1 billion, we can elect to keep 20% in gold or 50% or 100%.
That gives confidence and faith and encourages prudence and accountability. You can’t print currency as if it’s marketing fliers. We can keep the multi-currency in place and add the Zimbabwe dollar.
SB: How will the currency gain confidence because the mere fact of mentioning Zimdollar brings back bad memories; bank queues, hyperinflation, shortages?
GM:Strong currency is backed by credible economic policies, productive industry, policy predictability, respect of property rights and assures the public that currency printing is not policy. Obviously, there is need for confidence building measures which takes time and effort but it’s not impossible. Germany once had run-away inflation, Argentina once had hyper-inflation but today they have their own currency and bustling economies. In economics and finance, no situation is permanent. Things can improve if you enhance policies and adopt corrective measures and the markets will reward you.