Jayprog

The recent announcement by the Reserve bank of Zimbabwe governor Gideon Gono that the central bank could not account for Z$65 trillion out of the Z$67 trillion printed bearer cheques shows that there is something seriously wrong with the Zimbabwe accounting system at the central bank.

After a careful analysis of the figures it came to light that the shortage of cash was not mainly due to forex dealers as alleged but due to real economic causes. Imagine a country with inflation above 70 000% and street value exchange rate of 1USD: Z$2.5 million. This translates to a real value of USD 28.6 million running a country with a population of 15 million people. This translates to USD1.9 per citizen. 

Taking the above maths into the Zimbabwean economy, it means each citizen has a share value of Z$5 million and the good governor expects people to bank money that is not already sufficient for the citizenry alone. My calculations do not include companies and the government itself(a big spender).

The above analysis simply shows that the governor is fooling the nation and that he wants to blame people for the disappearance of his artificial money. The truth of the matter is that the Zimbabwean economy has a serious deficit of everything that one can imagine and money included.

Since the adjustment of all commodity prices to price as at July 18 2008, the prices have since gone up by more than 1000% against the same amount of money that was still in circulation as at 18 July 2008. As a result of this there is few money chasing very expensive goods and the money is bound to be a scarce commodity by simple economics since the products cannot be converted readily to cash.

The governor needs to abandon bush economics and let the market forces rule the economy. One way is to let the dollar free fall to the level that it settles on its true value against the major currencies. This setup will discourage speculation as the Zim dollar reflects true value. Another way would be allowing the introduction of other currencies into play to stabilise the rising inflation rate. This setup will easy money supply problems in the sense that the RBZ will not be tied to money supply since this will be from export earnings and other informal trade. The true value of forex is on a global index and the shift is not as astronomical as that of the Zim dollar.

In trying to find solutions to these problems, there are many noble ideas that come up but are not taken for selfish reasons that are not taken by politicians who want to profiteer from the system where there is a fixed exchange rate. It is worth to note that the majority of forex earned by the nation is accessed by politicians at 0.012 US cents per 1USD. This shows how lucrative the fixed exchange rate is for the politician.

The bottom line is to remove artificial money from the system to restore sense into the economy.

taxation is another thing that is making the economy go down. In real sense the private sector employees are the ones paying tax to pay the civil servants. The income tax reflected on the civil servants pay slips are artificial and as a results of many companies closing down and brain drain at its peak, the government is getting broke day by day.

No amount of talking and threats will solve the economic problem except facing the real issues. The recent introduction of a new breed of bearer cheques is sign that the system is failing, the central bank shelved the introduction of the   notes after realising that inflation was rising at a rate greater than printing the dollars. Very soon the paper on which the cheques are printed will run out and another disaster is looming. as I write this most Zimbabweans are angry because their holidays have been spoiled due to cash shortages all over the country.

 

Banks were busy issuing brand new $200 000 notes with RBZ ribbons and one wonders why this money is being issued when it is expiring in 9 days. it bring another thought, is the RBZ governor really serious about the whole exercise? Just like the price controls, it looks like the Price Control Task force has been disbanded. The use of bearer cheques can also continue beyond the deadline since there has not been any deposits coming to the banks anywhere. The new bearer cheques have an issue date of 1st July 2007 and no one knows why the good governor kept the whole bunch of the trading paper when people are suffering.