New currency without public confidence won’t solve crisis

Will the new currency be able to satisfy these requirements under the current economy and poor governance?

The government of Zimbabwe through the Reserve Bank of Zimbabwe (RBZ) has launched a new currency, which it calls the Zimbabwe Gold (ZiG).

We have been here before and it is key to understand if the ZiG dollar will be successful.

It is important to establish whether or not it will effectively have monetary characteristics.

It has to command confidence, which is critical for its survival as a unit of account and means of exchange especially in this volatile economy influenced by politics.

Some of the monetary characteristics include divisibility, acceptability, portability, homogeneity, durability, scarcity, fungibility, and store of value.

Will the new currency be able to satisfy these requirements under the current economy and poor governance?

It is important to note that the introduction of a new currency is not an answer to high inflation and hope for the stabilization of the economy.

 The initiative by the government goes against the concept of transparency as well as the right to be informed.

The initiative is being imposed on the citizens. The government issued no notice of its intention to “launch” a new structured currency.

As it stands the public has no idea what the new ‘structured currency’ is all about or what it entails.

Looking back at the history of monetary changes in Zimbabwe, they have always had undesirable effects on businesses and people in general.

The intended imposition by the government is likely to attract the same effects unless the institutions overseeing its introduction and management regain public trust.

 The public is sitting in the dark and is anxious as to whether or not they will lose their money in their banks.

Do they withdraw their monies from the bank or do they trust the government and hope that they will not lose any money like they did in 2019?

There is a high level of uncertainty with the intended structured currency system.

The new RBZ governor John Mushayavanhu has not offered any satisfactory explanation to the public on what the new currency would mean to the banking sector, businesses, or the general public.

The government just ambushed the people of Zimbabwe without any explanation about the new currency.

The public is likely not to have trust and confidence in the new tender therefore leading to loss of value of the currency.

Making such drastic monetary changes without public confidence is chaotic and messy as these changes also affect people’s businesses as well as property rights. As already witnessed before, it yields nothing.

As it stands, such decisions and procedures are under the control of politicians and it is not novel that they (politicians) do what is best for their agendas and not the people.

Will the new currency benefit the nation by doing away with inflation and stabilising the economy?

 Without any clear explanation of the new currency, people remain at risk of losing their money as they remain in the dark about whether or not to dispose of their money.

 They might wake up and be told that the money they had in their accounts is worthless or has depreciated.

Without a clear understanding of the system, it is difficult to assess or determine the extent of the effects it may have on the public as well as businesses and property.

Are there remedies for persons negatively affected by the new currency?

In the case of Stone/Beattle Studio v CABS & Ors HH 287-20, the court ruled that any government’s right to control its currency does not include the ability to arbitrarily switch the money in a bank from one currency to another as doing so would violate section 71 (2) of the constitution’s guarantee of property rights and is against the law.

In this instance, the court stated that allowing the State/CABS to simply rename money in an account and decide that it has become something else distinct from what is in the account would be counter to all concepts of justice and fairness, the rule of law, and good governance.

The court said no reasonable person would have made the choice that has the effect of eroding a person’s investment and savings in such a manner.

Therefore, those who would have lost their money or businesses could approach the court for recourse so that they can protect their constitutional right.

The government can also introduce measures or compensation for those who would have made losses.

Will the structured currency system be successful?

Most people are skeptical of the new currency and have already prophesied its doom even before its use.

The likelihood of a success of the ZiG dollar is directly related to the adequacy of the preparations.

Issues that must be addressed include the choices of exchange rate regime and convertibility for the currency, strong legislation for supporting the currency, progress towards developing a fully fledged central bank, and, if necessary, negotiations with any remaining members of the old currency zone.

Other considerations that often arise in association with a currency conversion are whether to introduce coupons as an intermediate step before issuing the “ultimate” currency or whether to use the currency conversion to accomplish other, unrelated objectives, e.g., to punish economic criminals.

Therefore, these steps have to be taken and adhered to for this currency to be successful or we risk continuous introductions of currencies in Zimbabwe.

These preparations and steps will also help banks, law makers, and all relevant stakeholders in adjusting to the new system.

*Mlondolozi Ndlovu is a Zimbabwean media practitioner and media trainer. He is an aspiring legal practitioner at the University of Zimbabwe and can be contacted on 0778351296

Related Topics