Zimbabwe News and Internet Radio

Hopewell Chin’ono: President must intervene and float Bond Note currency to avoid total collapse

By Hopewell Chin’ono

I am seeing developing queues and panic buying everywhere in Harare including at fuel stations and supermarkets that are ordinarily quiet.

Hopewell Chin'ono
Hopewell Chin’ono

There is unrestrained panic buying and as a result, essential goods are flying off the shelves and a crisis is being created whilst the government is watching.

This panic buying is being caused by the artificial exchange rate between the US Dollar and the Bond Note/ Real-time gross settlement systems (RTGS).

Citizens are scared that as the black market rate keeps on escalating upwards, their RTGS monies will cumulatively become worthless overnight.

I am not an economist or finance fundi, but I can safely say that if the Finance Minister and his team allowed the Bond Note to trade on the open market freely, these currency distortions will resolve themselves and stabilize the runaway prices.

Secondly, if the President comes out with a proper economic roadmap, which he himself annunciates to the nation, it will calm the market nerves.

Markets respond positively to such statements when they are underpinned by a realistic plan and they also respond negatively to a vacuum as we now have.

The President is the ultimate authority in any country such that when he talks, both his supporters and adversaries will sit and listen.

We are now in that space where our President needs to talk to his people because we are now in a crisis of sorts.

The President could start by announcing cuts in government spending including the controversial new cars for ministers and Members of Parliament.

He can also talk about how the government travel bill will be cut by removing 1st class travel for cabinet ministers and also tell the nation how the huge allowances given to government officials will be cut by half. They get up to US$5000 per trip.

The market and the citizens want to know what government will do to address the unrestrained appetite for government spending and more importantly, the unsustainable borrowing.

The silence and lack of public engagement on these pressing issues is creating all manner of “market panics” as we are seeing now.

You know me and my whisky examples, today I am thinking of buying something that I have never bought in Zimbabwe, Johnnie Walker Blue Label.

I am doing so not because I have loads of money but because of the economic value that I will unlock from buying that whisky.

A Johnnie Walker Blue Label whiskey costs $300 (Bond) at Bon Marche today, its true value in South Africa today is US$200.

The real value of $300 (Bond) today is US$130.
So I am buying this premier whiskey less US$70 of its South African value because of the currency distortions in the market.

I repeat again for the umpteenth time, the Bond Note is not equal to the US Dollar and as such, the central bank governor must not carry on misleading himself that the two are equal.

That assumption is what is what is causing this panic buying and the ensuing shortages of goods on the market.

There is a big monetary premium for all things that are done illegally.

The black market is illegal and as such, the price of securing the greenback will come down and stabilize if there is open currency trading of these currencies in banks.

Even bottled water is now being rationed. That should tell us something about the central bank foreign exchange illusion.

As the black market rate keeps going up, goods are also being priced out of reach for the ordinary folk who are earning their keep in RTGS.

Currently parastatals like Air Zimbabwe are bleeding money because they are selling air tickets using the fixed exchange rate.

Zimbabwe went through this disastrous scenario again in 2007/08, haven’t we learnt enough from this terrible past?

At some point, this cycle will break and at that point, shops will stop restocking and we will be back to 2007/8 bust period.

We can still avoid this type of scenario if the President, Finance Minister and their Central Bank Governor accept that the monetary policy was a huge yawn and miss.

He says that he is a listening President and his record shows that he indeed has been listening, he should therefore respond to the biting economic challenges before the nation.

Listening and responding is a sign of strength not weakness.

Hopewell Chin’ono is an award winning Zimbabwean international Journalist and Documentary Filmmaker. He is a Harvard University Nieman Fellow and a CNN African Journalist of the year.
He is also a Fellow at the University of Oxford’s Africa leadership Institute.

Hopewell has a new documentary film coming out which is looking at mental illness in Zimbabwe called State of Mind. State of Mind has been nominated for a top award in Kenya. You can watch the documentary trailer below.

Hopewell can be contacted at [email protected] or on twitter @daddyhope