Beware of bearer cheques repeat

By Eric Chiriga

During deposed president Robert Mugabe’s time, government was notorious of playing a blame game, coupled with focusing on symptoms rather than dealing with the root cause of a problem.

This perpetuated untold suffering of the vulnerable ordinary masses. Today — under the new dispensation led by Mugabe’s successor, President Emmerson Mnangagwa — Zimbabweans continue to be haunted by the same problems.

Of note is the liquidity crisis — foreign currency and cash shortages.

The problem has been persisting for a long time, having started during Mugabe’s era, despite the respite that occurred between 2009 and 2013 after the scrapping of the bearer cheques — a unique currency similar to today’s bond notes.

Through these phases and challenges, lessons must have been learnt by authorities on how to really address Zimbabwe’s stubborn liquidity crisis.

Without doubt, one of the lessons that surely must have been learnt is that targeting illegal foreign currency dealers is not the solution.

Back in 2006/8, at the deepest depths of Zimbabwe’s economic crisis, illegal foreign currency dealers were rounded up almost on a daily basis, but the foreign currency market flourished even more. Exchange rates between the bearer cheques and the United States dollar skyrocketed to unprecedented levels.

The bearer cheque was rendered useless.

Rather than address the deep-rooted underlying problems, authorities targeted the black market traders, who were mere vectors self-enriching from the chaos.

The pandemonium only stopped after the Mugabe regime bit the bullet and scrapped the infamous bearer cheques.

The problem was solved almost instantly. The crisis stopped immediately. The illegal foreign currency traders disappeared from the streets.

Admittedly, they facilitate “illegal” transactions between the buyers and the sellers of the hard to come by United States dollar.

Now, looking at history, it is worrying to hear our monetary authorities argue that the illegal foreign currency traders are at the centre of the crisis.

According to media reports, the Reserve Bank of Zimbabwe (RBZ) announced that it had suspended giving highly sought-after greenbacks to banks because the “rogue” forex dealers will take it straight to the parallel market, thereby exacerbating the crisis.

RBZ governor John Mangudya was quoted as saying: “Even if we put a lot of money into ATMs, people will take the money and go and sell it because the United States dollar is being looked to as an investment as opposed to being a medium of exchange.”

“So what makes people take money from the ATM is that they want to sell it 50 cents above its value … it has become an industry of selling money but we need to sell products,” the central bank chief said, adding “… should we put more money into ATMs for people to get money or should we put more money into the industry, which is employing people? It’s better to go for the latter.”

To his credit, pointing to the fact that there is more to the crisis than the black market traders, he said: “Currency reforms require that we address the challenges that the economy is facing, which are your fiscal deficit, which is the major source of money in the market.”

Now, the simple word of advice, guided by the painful past experience, is; government must scrap the bond notes.

Everyone would agree that today the unique currency has significantly lost value. It is crashing.

Authorities need to act decisively to avoid a repeat of the bearer cheques scenario.

Everything scarringly seems to point to that. DailyNews