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\n<\/div>\nAlmost two decades of profligate monetary policy has destroyed Zimbabwe\u2019s economy and fueled rampant inflation, decimating the savings of its people twice.<\/span><\/span><\/p>\n Hyperinflation of as much as 500 billion percent in 2008 made savings worthless and led to the abolition of the local currency in favor of the dollar the following year. <\/span><\/span><\/p>\n <\/p>\n In 2016, former President Robert Mugabe\u2019s cash-strapped government introduced securities known as bond notes that it insisted traded at par with the dollar. In 2018, it separated cash from electronic deposits in banks without reserves to back them, causing the black-market rate to plunge.<\/span><\/span><\/p>\n Last week, it threw in the towel and allowed bond notes to trade at a market-determined level, once again slashing the value of savings. <\/span><\/span><\/p>\n <\/p>\n The decision came after the southern African nation faced shortages of bread and fuel, was hit by strikes and protests, and President Emmerson Mnangagwa\u2019s drive to attract new investment floundered.<\/span><\/span><\/p>\n \u201cAt the root of this is the currency crisis,\u201d said Derek Matyszak, a Zimbabwe-based research consultant for South Africa\u2019s Institute for Security Studies. \u201cThis is analogous to them creating a giant Ponzi scheme that originated under Mugabe. What we are seeing now is that Ponzi scheme collapsing.\u201d<\/span><\/span><\/p>\n \u20181-to-1 Fiction\u2019<\/span><\/b><\/span><\/p>\n The latest step, while welcomed by what\u2019s left of the country\u2019s business sector, is unlikely to solve Zimbabwe\u2019s problems because all it does is reflect exchange rates on the black market, according to Steve H. Hanke, a professor of applied economics at\u00a0Johns Hopkins University\u00a0in Baltimore.<\/span><\/span><\/p>\n <\/p>\n \u201cThe 1-to-1 is a fiction,\u201d Hanke said. \u201cThey are saying officially we are going to condone what has been happening anyway. It officially says, \u2018we robbed you.\u201d<\/span><\/span><\/p>\n The interbank rate for the new currency is about 2.5 to the dollar, data published on the central bank\u2019s website shows. That figure is meaningless because the authorities are failing to divulge the volume of trade, according to\u00a0<\/span><\/span>marketwatch.co.zw<\/span><\/span>, a website run by financial analysts. It estimates the black-market rate for the bond notes is 3.36 per dollar.<\/span><\/span><\/span><\/p>\n <\/p>\n The origins of Zimbabwe\u2019s currency crisis stretch back to a violent land-reform program initiated by Mugabe in 2000, which slashed export income and devastated government finances.<\/span><\/span><\/p>\n In response, then-Reserve Bank of Zimbabwe Governor Gideon Gono, known as \u2018God\u2019s banker\u2019 because of his close ties to Mugabe, increased printing of Zimbabwe dollars exponentially to pay government workers, stoking inflation and eventually making the currency valueless.<\/span><\/span><\/p>\n Printing Money<\/span><\/span><\/b><\/p>\n <\/p>\n \u201cIt was a Ponzi scheme in the past,\u201d said Ashok Chakravarti, an economist and lecturer at the University of Zimbabwe. \u201cEspecially in the Gono era, where that chap just kept printing money.\u201d Gono didn\u2019t answer a call to a mobile phone number he has used in the past.<\/span><\/span><\/p>\n The currency\u2019s collapse led to the predicament Zimbabwe now finds itself in — chronic cash shortages and rampant inflation.<\/span><\/span><\/p>\n By late 2008, some Zimbabweans had reverted to barter trade as illicit dealings in foreign currencies flourished. In February 2009, the answer the government came up with was to switch to the use of foreign currencies, mainly the U.S. dollar.<\/span><\/span><\/p>\n \u201cDollarization puts a hard budget constraint on the system,\u201d said Hanke. \u201cYou can\u2019t go to the central bank or any other government institution to get credit for the government.\u201d<\/span><\/span><\/p>\n Repaying Debt<\/span><\/span><\/b><\/p>\n The pressure on government finances led to history repeating itself, with a loophole being found: the introduction of bond notes and locally denominated electronic money. That contributed to money in circulation growing to more than $10 billion, according to George Guvamatanga, the permanent secretary in the Finance Ministry. The figure was $6.2 billion in 2013, said Tendai Biti, a senior opposition leader and former finance minister.<\/span><\/span><\/p>\n \u201cIf you continue to print money you are destroying what you are creating,\u201d Guvamatanga said. Under a stabilization program introduced by Finance Minister Mthuli Ncube in October, the government is now repaying domestic debt, has stopped issuing Treasury bills and has no overdraft with the central bank.<\/span><\/span><\/p>\n That\u2019s helped the economy move toward \u201cwalking on two legs, there is an effort to go in a different direction. It\u2019s an inevitable adjustment.\u201d\u201d Chakravarti said. \u201cIt\u2019s very unfortunate that this is the second time in 10 years people have lost the value of their savings. In 2009 we all went down to zero including me.\u201d<\/span><\/span><\/p>\n For some observers the latest development isn\u2019t a sudden discovery of fiscal discipline. It\u2019s another admission of failure and the victims are Zimbabwe\u2019s people.<\/span><\/span><\/p>\n Zero Savings<\/span><\/span><\/b><\/p>\n To Biti, who says the new currency will fail because it isn\u2019t backed by reserves, it shows the country has come full circle.<\/span><\/span><\/p>\n \u201cIt\u2019s theft because people had regrouped and rebuilt their lives from zero based on the U.S. dollar,\u201d he said.<\/span><\/span><\/p>\n The country\u2019s best hope is to join southern Africa\u2019s Common Monetary Area, which is dominated by South Africa and its rand, Biti said. That would give certainty to business and impose fiscal discipline on the government, as opposed to the current arrangements that are unsustainable, he said.<\/span><\/span><\/p>\n \u201cIt\u2019s a Ponzi economy,\u201d he said.<\/span><\/span><\/p>\n<\/div>\n![\"\"](\"https:\/\/cdn.ghanamma.com\/2019\/03\/4451621657289_7631974807164.JPG\")
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