Zim Currency Reforms Revisited

Zimbabwe introduced a “return of the Zimbabwe dollar” on Monday 24 June 2019 in terms of Statutory Instrument 142 of 2019.

In the interim the Reserve of Zimbabwe has made indication that the Zimbabwe Dollar will be represented by the surrogate bond notes and the RTGS Dollar (electronic money).

On 25 June 2019, we issued our interim statement indicating that the new currency reforms would not stabilize the economy on the basic of the following:

  1.  Public and international perceptions on the Zimbabwe Dollar
  2. Absence of Public Education
  3. Incommensurate macro economic /fiscal reforms
  4. Inadequate logistical and feasibility tests

Central to our argument is that Zimbabwe has NOT met the necessary preconditions i.e. a return to macroeconomic fundamentals. In this instalment we submit the economic fundamentals necessary and compelling for Zimbabwe to stabilise and achieve inclusive growth underpinned by a Social Market Economy through our alternative economic policy blueprint, the Zimbabwe Social Market Agenda for Recovery and Transformation. The blue explores 6 fundamentals as follows:

  1. Macro-economic stability that is pro-poor, inclusive and human –centered with increased fiscal space, a high degree of competitiveness, a salubrious environment for domestic and foreign investment, a strong export economy and high degrees of innovative capability. The State must be in a position to play its facilitatory role in the economy, enhance real sector performance, currency stability and measures to ensure the financial sector, especially banks are stable. Central is how government can improve revenue generation to release funds into the productive sector in order to create jobs and grow the economy. Precisely we propose enhancing the fiscal space through adopting a sustainable debt strategy, re-prioritization of expenditure; restructuring State owned enterprises, rationalization of the size and structure of the Government, taxation reforms, promoting domestic investment, leveraging remittances from the Diaspora, attracting Foreign Direct Investment (FDI) and re-engaging the international community.
  1. Revival of the productive sector with Small to Medium Enterprises (SMEs) being the backbone of the economy given the changing political economy where these dominate. Sectors to be prioritized include agriculture, mining and the manufacturing sector which have been the pillars of the national economy. In each of the three sectors, the blueprint advocates for policy reforms (e.g. land and mining policies), legal reforms (e.g. property rights), institutional and administrative reforms (restructuring key institutions within Ministries). The blue print argues for pro-small scale financial services and credit facilities, a redesign of technological support appropriate to current context, an adaptation of market systems and supply chains, not exclusive to, but also inclusive of high- value export markets beyond primary commodities. The chapter also articulates the need for active intervention of the State not through Command and Iron fist policies but through coordinating, facilitating and providing focused subsidies and start-up finances to rejuvenate the sectors. Of essence is the provision of stimulus packages to the informal sector and SMEs for finance easing, allowing cuts on taxes and encouraging the SMEs to do value addition to increase marketability at a national and global level. If reforms are followed, the manufacturing sector capacity utilisation would be expected to exceed 50% within the first year of the measures. The increase in capacity utilisation to 50% would thus be expected to create an increase in GDP contribution to about 13.3% in the first year of the reforms, which would be expected to be more than 20% in the medium to long term. Revival of the 
agriculture sector, with the associated value chain benefits, would also help increase the sector’s contribution to real GDP significantly from the average of 11.5% between 2010 and 2014 to about 20%. Given the dominance of agriculture activities as a source of livelihoods, the impact on poverty alleviation would also be significant in the rural areas. The mining sector earnings would be expected to double to about US$3.8 billion. The recovery of the productive sector would thus be instrumental in economic recovery, as the three sectors, which currently contribute more than 30% to real GDP would be expected to contribute about 60%.
  1. Highly developed, functional and modern infrastructure that forms the engine of economic growth. Rehabilitation of roads, rail, air, water and sanitation, energy and ICTs should be the government priority. There is need for a reliable transport system aimed at facilitating the movement of goods, people and services across the sectors of the economy, linking regional and international markets to boost social and economic development. Rehabilitation of energy, including renewable energy, should ensure revitalisation of old plants such as Hwange and Kariba power stations. Increased power generation must meet the national demand for industrial and agricultural use to spur economic recovery and growth. This must be accompanied by the revival of the water infrastructure to ensure adequate domestic, agricultural and industrial uses. The blue print also proposes the use of ICTs to ensure Zimbabwe in the long term is a hub of cutting edge ICT driven economies. Central to the rehabilitation of the infrastructure is to avoid an urban bias and ensure the need for transformation of the rural economy where the majority live in order to avoid a dual enclave economy reminiscent of the colonial era. The government must complete the establishment of the Public Private Partnership (PPP) legal framework and accept the offer to help from the Africa Development Bank (AfDB).
  1. Creation of professional, transparent, accountable and globally competitive economic institutions. Some of the institutions at the centre of the national economy that need rehabilitation include the Ministry of Finance and Economic Development, Reserve Bank of Zimbabwe (RBZ), Zimbabwe Revenue Authority (ZIMRA), State Procurement Board (SPB), Social Dialogue Platforms, National Competitiveness Commission, National Economic Consultative Forum, Zimbabwe Investment Authority, National Productive Institutions and Auditor General. On the major indicators of institutional quality, Zimbabwe was ranked 176/178 by the Heritage Foundation Index of Economic Freedom, 157/177 by the Transparency International Corruption Perception Index and 46/52 by the Mo Ibrahim Governance Rankings. The blueprint proposes the central functions of each institution in the interest of sustainable economic growth. There is need for transparency, honesty, cost-effectiveness and competitiveness in procurement of goods and services in all institutions and agencies of government. The Government must also deal effectively with the issues of patronage, revenue leakages, corruption, low capitalization and review policies such as indigenization that have been affecting the optimum performance of national economic institutions. The quality of economic governance institutions is closely associated with economic performance.
  1. Clarion call for a modern, equal, peaceful, open and pluralist society where everyone enjoys equal opportunities in life. Health institutions must be reformed to ensure that there is medical care for all in line with section 76 (1) of the Constitution. In the 2014-2015 national budget the Government of Zimbabwe allocated $337 million of the $4.2 billion budget to health, a measly 8% which falls short of the 15% recommended by the Africa Union (AU) Abuja Declaration of 2001. In the medium to long term the state must establish a National Health Insurance scheme that is publicly funded to ensure that healthcare is available to every citizen who needs it. Reform of the healthcare system will require a health fund where donors must contribute. In line with the bill of rights as in section 75 (1) of the constitution there must be education for everyone, and the promotion of technical universities that focus on engineering and natural sciences as well as vocational training. Although in theory the government has allocated 24% of the 2014-2015 national budget to education, which is above the United Nations Education Scientific and Cultural Organisation (UNESCO) recommended threshold of 15-20% of public expenditure, and which compares favourably with other countries, the reality is that the state is failing to collect enough revenues to make the money available and as a result the education ministries are struggling. In addition, Zimbabwe must bear tenets of a welfare state that prioritizes the social protection of all its citizens. As a result, the state must provide social assistance to the vulnerable such as the elderly, children, war veterans, unemployed and women in the form of pensions and long-term care insurances. On the other hand, collective labour bargaining with minimum wages should be promoted. The chapter also emphasizes the right to food and water for everyone. A vibrant spectrum of cultural and religious diversity is also an important aspect of a society that guarantees happiness for everyone. The idea is to create a society where people are well educated, healthy, and happy and enjoy a high standard of living as well as freedoms to exercise their choices and contribute to economic growth. For full realization of this there must be equal representation of men and women in key spaces in line with the new constitution and elimination of all forms of discrimination against women.
  1. Devolved constitutional state where the bill of rights should be the cornerstone of economic development with a political system built on a free and fair electoral system and a competitive multi-party system to strengthen the social contract and Government legitimacy. Legitimacy is a cornerstone of economic rehabilitation in Zimbabwe. The political system must allow for the principle of subsidiarity where local communities must actively participate in economic decisions that affect their day to day lives in their locality. In addition, local authorities must have the right to regulate themselves. The chapter also calls upon the government to uphold a legal system that protects the fundamental liberties, equality before the law, respect of property rights and the rule of law and the curbing of patronage and corruption. In line with this, is to create a national value system based on ubuntu. Politicians and bureaucrats must be subjected to a high standard of professionalism, accountability and the law. Without upholding a constitutional democracy and the rule of law, any economic policy is bound to fail in the 21st century especially within the context of Southern Africa’s geo-politics.

It is our hope that our policy propositions can ignite debate and dialogue on the best way forward for Zimbabwe as we seek a lasting solution.


Kindly find attached a copy of the ZIMSMART Policy Document.

Zimbabwe Social Market Agenda for Recovery and Transformation -ZimSmart

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