Proved Right Yet Again As Government Bans Zimbabwe Dollar
BEST OF FRIENDS: So much so that in today's Fiscal Policy Review, the Minister simply restated and activated tired Mugabe and ZANU PF policies
The following stories I have previously published have today been confirmed by Tendai Biti, MDC Secretary General and Minister of Finance.
- All Zimbabwe Dollar Accounts To Be Dollarised, which I published here on 23 January 2009
- Zimbabwe Approaches South Africa to Officially Use The Rand, which I published here on 01 January 2009.
With regards to the dollarisation of the Zimbabwe dollar accounts, Mugabe's strategy as I told you in the article about dollarisation of the bank accounts has been followed pretty much to the letter.
Biti said in his statement today that about "US$6 million will be required to purchase the entire stock of Zimbabwe dollar balances with banks as well as cash outside the banking system."
This indicates that Gono's approach of vindictiveness, in which he sought, as I explained, to lock up huge sums of money made "shady" characters and then pay a pittance in US dollars later, has now been approved by Tenda Biti and this Inclusive Government.
Somehow, with an eye to populism (Biti mentioned "special" treatment for those with smaller amounts in bank accounts), we may even see a sort of "dual" exchange rate being effected, where the common man gets a higher rate and those with quintillions in their accounts a much, much lower one.
Quite a few companies and some individuals who were big shots before are going to see their wealth disappear overnight. Already, this has led to a collapse in the prices of vehicles, for instance, with housing to follow by year-end, as a desperate public sells off assets to a shrinking economic base.
On the approach to South Africa to use the Rand, Tendai Biti gave the game away with this one statement that Zimbabwe, once stability in the economy is achieved and strengthened, "will also consider a number of (currency) regime options, guided by the SADC objective of achieving a unitary currency by 2018.
What he did not tell you, which I told you in January, is that all he is doing is fulfilling the conditions set by the South Africans, including, namely, as I said then, "the South Africans would like to see a stabilisation period of between six months to a year in which Zimbabwe suspends the use of its own currency altogether".
Biti did just that today, announcing the official demonetisation of the Zimbabwe dollar, meaning that as of right now, THE ZIMBABWE DOLLAR HAS BEEN BANNED. It is no longer legal tender within our borders or anywhere else for that matter.
So, the "suspension" required by the South Africans starts today. Before today, the Zimbabwe dollar was still circulating, being used mostly as change in buses and by vegetable sellers and so on. You could pay fares and buy things with it, still, although its use was extremely restricted. But now, it is no more. So start counting the six months to a year from this month.
The other concern from SA was government finances, since they did not want to have to advance Rands to the Zimbabwe government, which routinely overspends and runs to the monetary authorities to get more money.
This is why Biti is sticking to a "Cash Budget". Ideally, he would want to have a balanced budget by the end of the year, although this is unlikley, seeing as his Ministry is extremely weak and was, in the last five months, bulldozed by Ministries into paying for unbudgeted expenditure.
All he is doing is demonstrating that this government can live within set budgets and within its means. This is not going well at all.....
Biti only stayed within Budget because he cut funds to other essential services, so you have Harare Hospital getting less than US$500 000 of the US$3.5 million it requires, while unbudgeted foreign travel for Ministers, President and so on was fully paid for at US$11 million!! (I will be doing a greater analysis of this joke of a Mid-Term policy tomorrow).
The sticking point, one from which Mugabe is still recoiling, is the official removal of the monetary responsibilities of the Zimbabwe Reserve Bank. In other words, taking monetary policy for Zimbabwe out of RBZ hands and handing it to the South Africans.
Slowly, but surely, it is being proved that the Inclusive Government is nothing more than the continuation of ZANU PF rule under a regime in which the MDCs have simply been coopted.
There is no other explanation for the pursuit of policies that were crafted and set by Gono and Mugabe in Helensvale, long before Tsvangirai and Co jumped onto the Gravy Train.