#MondayBluesBreaking NewsBreakingNewsBusinessCurrent NewsGeneral NewsInvestigativeNationNewsTech-Business

Gold Coins NO Panacea For Run Away Inflation

0

Zimbabwe has been experiencing a run away inflation in the past months, with a daily drop in value being experienced, pushing the parallel market rates to trade at an all time high of $1:900 against the green back.

The government via the ministry of finance announced a cocktail of measures , but these did not stop the nosedive in value of the RTGS currency, as it seemed the more they announced measures, the more the dollar weakened, a clear sign of no confidence in the measures by the government.

Nevertheless, the latest masterstroke of introducing gold coins have stalled the runaway inflation, the prices have stabilized, the rtgs currency has been stable on the parallel market and the government was so quick to celebrate this move as the panacea to run away inflation.

In my last #MondayBliues installement I clearly stated that this was a masterstroke move, and it still is, but it has its limitiations that we must underline, which if not addressed the run away inflation will be much more worse, and this time without any more remedy.

The major reason why the parallel market stopped the free fall was not because of a stable currency or production, no, it was simply because that many businesses who had extra RTGS for saving were ready to dispose these at whatever rate available,to try and serve value from the volatile RTGS.

This created a scenario where millions of RTGS where chasing USD from the parallel market as investors struggled to store value, ordinarily weakening the currency as everyone is offloading for a safer value retention.

Shockingly the excess RTGS have been moped up for gold coins, there seems to be confidence in the coins, in their value retention and the fungibility for future conversion to pay the bearer on demand, hence they resembled money to a larger extent.

The introduction of gold coins have stabilized the parallel market rates as it is reported to have mopped over ZWL$5.5bn excess local currency, the central bank says 6800 gold coins have been sold. Of that, 75% was bought by corporates and the remainder by individuals.
While this is a move worth celebrating, its in violation of basic economic princeples, hence only temporary and may be disastrous in future.

The move is tantamount to stopping serious bleeding on a patient, once the bleeding stops, the doctors stop to retire into partying, forgeting the patient will neeed blood to be resuscitated and also will need food to keep alive.The Zimbabwe finance minister has successfully stopped the bleeding but must quickly implement measures that stimulate the economy to grow, be productive, create value for local currency and have a kicking productivity to back the currency.

If these fundamentals are not yet in place, the patient will not die from bleeding but , malnutrition while in hospital, the economy will need to feed on production and back up its currency with real value for international trade.

The RTGS does not trade with any country, its not a currency, it can not pretend to be currency, and its life can only go so far, before it dies a natural death.

The runaway inflation has not saved the dollar, it has remained above $800 against the dollar, this is not stabilization, it’s a pause, real progress worth celebrating must see the dollar gaining value even on the parrael market, ironically even on the official market the RTGS continues to lose value, this must be telling
The measures have not rescued the economy, the narrative is false and the results could be futile, in the next few weeks, the RTGS may start sliding heavily,and government is not doing enough to save it.

We have seen government ministries and agents increasing the tarrifs by more than 50% in RTGS and this is retrogressive as it kills the same currency they purport and seek to protect.

Zinara every month increases their toll gates and vehicle licencing fees, government ministries have done the same, government fines are being rated against the dollar and many more government agents are following suit.

This dissuades the use of one’s currency as the value is being rejected by the statutory organs, begging the question why the general citizens must have confidence in the same currency.
Creating artificial demand on the RTGS is also not a solution, many Zimbabweans have already given up on accessing the hard cash as the central bank has maintained tight bank limits, these have greatly affected the unbanked and the rural community, squeezing them harder as they now only depend on electronic transfer, yet most traders would rather have hard currency or physical cash.

  1. This move of managing cash supply by deficience only affects the majority poor who rely on the bond notes and pay a premiuim to access it hence worsening the situation.
    The economy would need to be liberated, create policies that encourage local investiment, respect property laws and rule of law for economic confidence then the economy will start attracting real investors.
ross moyo

All set for the inaugural Potraz-Online Content Creators Workshop

Previous article

Muswere Launches Huawei Seeds for the Future 2022.

Next article

You may also like

Comments

Leave a reply

Your email address will not be published.

More in #MondayBlues