Harare – Zimbabwe’s fiscus, unable to meet significant foreign debts, nor provide cash for some crucial imports, was sinking fast this week as the black market rate for US dollars and other hard currencies such as the South African Rand, were roaring ahead invoking unhappy memories of 2007/8 when the economy shut down and a trillion Zimbabwe dollar note would not buy a loaf of bread.
The majority of transactions are now electronic with the value of price marked goods significantly higher in real terms then if the purchase was made in US dollars, South African Rands, or even the locally printed currency known as Bond Notes which were introduced into the economy by the Reserve Bank a year ago and cannot be used outside Zimbabwe.
Bond Notes, supposedly backed as a loan from the Cairo-based Afreximbank, and which are supposed to have the same value as US dollar notes which this week with a sudden escalation of the black market rate are about 35 – 40 percent lower in real value when they are available.
There is also other money, or alternative currencies in Zimbabwe. The government regularly pays its local debts with its own money, known as Treasury Bills.
These are bits of paper signed off by the Reserve Bank of Zimbabwe, which it says it will honour with real money at some future date. So far there are about US$3 bn of these bills floating around.
Ordinary people who have no cash, do their shopping using debit cards – if they have bank accounts – or by Eco Cash – cash on their phones – but levies on elecronic cash are heavy and so each transaction is presently pushing inflation ever higher.
The IMF predicts official inflation will be at 7 percent by year end, but in reality, around the town, it is set to hit more then 20 percent, economists estimate.
At least some politicians believe the sudden depletion of foreign money was sparked by fears that Grace Mugabe has taken over significant foreign cash from the Treasury with her and her family’s unprecedented spending on foreign luxuries.
Estimates from Air Zimbabwe’s costings are that the Mugabe overseas trips in 2017 will have eaten up about US$40 million by end of December, which includes daily per diems for scores of senior civil servants and cabinet ministers. At present there are about 70 of them with the Mugabe family in New York.
Finance minister Patrick Chinamasa was unable to answer questions put to him in parliament on Wednesday by independent MP, Themba Mliswa who claims the constitution is undermined by Grace Mugabe’s access to taxpayers’s money: Chinamasa said Grace Mugabe’s ‘transactions were outside of government if ever they happened.”
But Chinamasa who has tried to rein in government expenditure but is regularly contradicted by Mugabe, knows it was the Reserve Bank of Zimbabwe which transferred more then R40 million to an estate agent in Johannesburg after Grace Mugabe bought a mansion in Sandhurst earlier this year.
And that was just one of several properties/assets she has with foreign cash bought recently. She has a huge rental bill and security guard costs in a rented house in the same suburb. Her son from her first marriage, Russell Goreraza imported two Rolls Royces into Zimbabwe this week.
On Wednesday travellers and cross border traders at the main Harare bus terminus say officials who claimed to be from the central bank were confiscating small amounts of foreign currency notes, such as US dollars and South African Rands.
Zimbabwe’s Financial Gazette issued a warning in its editorial on Thursday: ”The Bourbons who, upon their early 19th Century restoration in France after the revolution, showed they had learnt nothing and forgotten nothing from the violent upheaval, Zimbabwe seems doomed to repeat its own mistakes from last decade’s crisis.”
“The Bourbons learnt nothing from circumstances that led to one of their predecessors being executed, nor did they forget, or change, their appalling conduct which sparked the revolution in the first place.
“No doubt petrified by the rapid worsening of economic conditions over the past year, Zimbabwe’s business leaders engaged President Robert Mugabe in dialogue last week.”
“The last time such a meeting took place was in 2007, just as last decade’s economic implosion intensified. At the time, the Mugabe government, which has a penchant for turning economic orthodoxy on its head with ruinous results, had imposed price controls which wiped shop shelves clean.”
“The central bank was maintaining a ridiculous exchange rate while printing money and driving inflation, already in the upper thousands, even higher.”
“Fast forward to 2017. There are no food shortages, yet. But government is, once again printing money it could be argued via its issuance of Treasury Bills with reckless abandon. Inflation, not quite in the 6 000 to 7 000 percent range it was ten years ago, is on the march again”
The Gazette says as in 2007, Zimbabwe is “in the grip” of a bank note crisis. In 2007 the RBZ kept on printing higher denominations cash notes, with Z$750 000 notes emerging at the end of the year.
“By the end of 2008, the country had issued a Z$100 trillion bank note, which could not buy a loaf of bread.”
The editorial said the present Bond Notes – and a further US$300 million is about to be released – are officially pegged at parity with the US dollar but in the last two weeks has sunk dramatically.
The editorial says the present circumstances have an “eerie reminiscence with 2007…Government refuses to curb its appetite to spend, nor will it do the needful to improve the climate for local and foreign investors. In fact, government refuses to learn the lessons of 2007 and will not forget, or change the reckless conduct that precipitated that crisis.”
