Zimbabwe dollar hits 14-year low, “It’s going to be a long winter”
While Finance Minister Mthuli Ncube is threatening to blacklist business companies he accused of conniving with the foreign currency traders, as well as retailers to “unjustifiably” raise prices of basic goods, Steve Hanke, a Professor of Applied Economics at The Johns Hopkins University in Baltimore has claimed that the Zimbabwean dollar has hit a 14-year low of 3600 ZWL/US$ in the parallel market.
Hanke believes that the government of Zimbabwe needs to dollarise to end the economic and financial crisis the country is facing.
“In Zimbabwe, the Zimbabwean dollar has hit a 14-year low of 3600 ZWD/USD in the parallel market. The ZWL has lost 93% of its value against the US$ since Jan 2022. Zimbabwe must officially dollarise, as it did from 2009-13,” he said.
In Bulawayo on Saturday, Ncube promised a crackdown on big businesses conniving with the foreign currency traders, as well as retailers to raise prices of basic goods.
When the Minister went into one supermarket, he took matters into his own hands, tearing down a sign that advertised goods in US dollars only.
“We want to send a message to your bosses. We are saying that they must stop these price hikes, which are totally unjustifiable. I am saying this because the next time we ask you to close and withdraw your licence, you will be out of a job and so will a lot of other people.
“Then the Government will be blamed for shutting down businesses when this is the only way because their behaviour is not proper,” he told managers.
“Have you heard of the word schadenfreude? It is a German word that means taking delight from the misery of others. In English, they call it epicaricacy. That is what you’re practising. It is not good.”
Economist Tinashe Murapata, however, slammed Ncube for not listening to his advice in 2019 when he stated that command economics would not work in Zimbabwe. He said this while quoting Jacques Turgot, a prominent French scholar whose writings had an impact on the French Revolution of 1789.
“He (Turgot ) warned French King Louis XVI that unless taxes and government spending were cut, there would be a revolution which might cost him his head. Turgot warned about the dangers of fiat paper money, and when it was resorted to during the French Revolution, the result was ruinous runaway inflation and a military coup,” Murapata quoted Turgot.
The analyst went on to say: “In an essay I wrote in 2019, I warned of the perilous path that the government of Zimbabwe had chosen of command economics. I thought to appeal and remind my good professor Mthuli of the great French Economist Turgot and his wisdom.
“Obviously I failed. The government of Zimbabwe remains decidedly command in outlook and only sort to appeal to Thatcherism as a form of diplomatic overture to the British governing conservatives.
“Watching Professor Mthuli this weekend was particularly painful for me. He sought to change the government but instead the government changed him.
“Which took me back to the ideas of morality and government. I mean cabinet members change their money on the parallel market like many.They don’t use the Auction rate. Yet in policy they impose the auction rate which is less than 10% of trades as the going rate for retailers. Is this the immorality of government?
“I notice many are farmers and get paid in American dollars. Do they keep money in the banking sector or they too use the National Mattress Bank. It’s going to be a long winter.”
Former cabinet Minister Jonathan Moyo also dismissed Ncube’s plan to institute a crackdown on businesses saying that the move would actually worsen the situation.
“One key defining feature of human beings as a species is that a better today is an expression of past experiences and lessons learnt.
“One compelling lesson learnt is that the national economy is at all times best managed through economic policy, to influence and shape desirable economic choices and economic behaviour that benefit the common public good.
“In this connection, a crackdown of whatever kind is not an economic policy. It’s the sort of thing that can easily make a bad situation worse.
“As seen in the past, when – as is now happening- retailers start pricing their goods in US dollars [instead of the precipitously falling rtgs ZWL] amid spiralling price hikes across the economy; and then that gets the authorities to respond by threatening or effecting a crackdown on businesses, goods predictably disappear from supermarket shelves and find their way in the dark market in streets and backyards.
“For many reasons, it would be prudent for the authorities to find better policy interventions than the threatened crackdowns, whose deleterious consequences on supermarket shelves, consumer pockets and dinner tables are now well known,” Moyo said.