Rédaction Africa Links 24 with Tim Cohen
Published on 2024-04-10 21:07:24
Zimbabwe’s new central bank governor, John Mushayavanhu, has introduced a novel approach to establish a functional local currency by proposing a currency backed by Zimbabwean gold reserves. This move comes as a response to the failure of re-establishing the Zimbabwean dollar in 2019, which has led to a significant loss in value and a resurgence of hyperinflation, currently running at 52%. In an attempt to prevent another economic crisis, Mushayavanhu has introduced the ZiG (Zimbabwe Gold), backed by 2.5 tonnes of gold from the Reserve Bank of Zimbabwe to instill confidence in the currency by linking it to a universally accepted exchange rate of gold.
However, there are concerns with this approach as the 2.5 tonnes of gold may not be sufficient to cover the entire value of the proposed currency. Despite the government’s efforts to enforce the use of ZiG by requiring 50% of taxes to be paid in the new currency, the adoption rate among ordinary Zimbabweans is minimal. The country’s economy has become heavily informalized, making it challenging to conduct business through official channels.
This is Zimbabwe’s sixth attempt to establish a functional local currency since the hyperinflation crisis of 2008, with previous attempts resulting in failure due to cronyism within the government. The close relationship between President Emmerson Mnangagwa and Mushayavanhu, who are long-time business partners, raises concerns about the independence of the central bank. The history of over-printing currency to maintain political support has only worsened the economic situation in the country.
The International Monetary Fund (IMF) has also criticized Zimbabwe’s economic policies, suggesting a comprehensive restructuring of the country’s debt and a reform plan to restore macroeconomic stability. The reliance on outdated and unsustainable economic strategies has further deterred investors and eroded public confidence in the economy.
The underlying issue in Zimbabwe is the lack of trust in the government, which hinders economic progress and necessitates a change in leadership to restore confidence and stability. However, the entrenched elite in the ruling party shows no willingness to relinquish power, further perpetuating the economic challenges faced by the country.
The situation in Zimbabwe is concerning, with citizens bearing the brunt of economic mismanagement and uncertainty. Despite the external criticism and calls for reform, the current government shows no signs of meaningful change, exacerbating the suffering of the Zimbabwean population. The lack of intervention from neighboring countries, such as South Africa, and the acceptance of Zimbabwe’s flawed economic system by various political parties highlight the dire need for action to address the crisis and prevent further deterioration.
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