Blame Game and False Hope for a Broken Currency: Next Africa

To buy a loaf of bread in the local currency of Zimbabwe, you need to count out 100 bills of the highest denomination.

Grocery shopping in the southern African nation invokes painful memories of 2008, when hyperinflation prompted the central bank to issue a 100 trillion dollar note, pensions were lost overnight and many resorted to barter.

The biggest bill is currently 100 Zimbabwe dollars, which is worth less than 1 US cent. The unit has lost a third of its value against the greenback this year and even more on the streets.

A Zimbabwe One Hundred Trillion Dollar Note
A one hundred trillion dollar Zimbabwe note that was issued in 2008.Photographer: Daniel Acker/Bloomberg

The official response has been bewildering.

John Mangudya, the governor of the central bank, attributes recent currency turmoil to a temporary loss of confidence.

Finance Minister Mthuli Ncube and President Emmerson Mnangagwa have previously played the blame game. They’ve lashed out at a range of supposed culprits for undermining the Zimbabwe dollar — a telecommunications billionaire, the stock exchange, banks, Western sanctions against some politicians and one of Africa’s biggest insurers.

The minister, who insisted on reintroducing the local unit in 2019, a decade after it was scrapped, has announced plans to tame demand for the US currency by increasing supply to the market — ignoring the inconvenient fact that state coffers are empty.

With the economy in free-fall and citizens having been burnt by breakneck depreciation before, predictions of a reversal in the Zimbabwe dollar’s fortunes appear to be a pipe dream.

Those who can avoid using it are already doing so: 80% of transactions are carried out using the greenback. Restaurant customers presented with bills containing multiple zeros routinely find a more comprehensible hard currency amount written on the other side.

The government may have to accept what citizens and businesses already know. The Zimbabwe dollar is all but dead, again. — Ray Ndlovu and Antony Sguazzin

Post published in: Business

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