Earlier this morning i went to purchase a fruit at a vendor stall, just one fruit, which was pegged at US$0.10. Normally in our multi-currency nation, one can use South African Rands or American minted coins, or alternatively Zimbabwe's own bond coins. Not so long ago, one could even use the Botswana Pula for such a purchase at street level, with no financial authorities involved and no exchange rate considerations. The Rand used to be relatively valuated at 10 times below the US Dollar, yet it was also deemed to be 1.5 times below the Botswana Pula. This did not matter to the citizens of Zimbabwe who basically openly traded with these two latter currencies at par, the US$ notwithstanding. For example, to purchase a single cigarette, one could use either a R1 coin, 1 Pula or US$0.10. During this same period, the infamous Reserve Bank of Zimbabwe introduced bond coins, which were summarily valued at par with the US Dollar!!
Sounds very confusing doesn't it? That's because it is!
At college i was an Economics major and i thoroughly enjoyed it, which really is quite baffling to most people since i dropped out of University in my second year. At the time i threw in the towel, i had learnt a bit of economic theory though and hence my confusion at Zimbabwe's economic state. Now back to this morning, as i offered a R1 coin to the vendor for her wares, she wouldn't accept it, opting for bond coins. These are the same coins these same people used to refuse at their introductory stage. Over the past few weeks since the xenophobic attacks, the Rand has held steady against the Dollar which essentially means it should be accepted as a form of currency just as it was before the attacks. Add insult to injury, Commuter omnibus operators (who are usually the perpetrators of currency rejection) embrace the Rand coins as payment for commuter fares! Quite recently i went into TM stores to purchase a few groceries and having given the till operator a US$20 note, the screen resonated with info that my change was US$7.45. The operator then handed me my $7 as well as about R7 in coins. I thought to quiz her over the presumable surplus change of R3 but then it dawned on me, they are actually now respecting the international exchange rate, which they weren't before.
What then is the statute of limitations to our national approach on exchange rates? From recent practices, i would have assumed aggregately our nation ignores market exchange rates and prefers Purchasing Power Parity theory. In a way, that could explain the surmise i proposed in the initial paragraph of this post. If that surmise were true, however, then the booming exchange rate business on our street corners would not exist and the ximex mall phone dealers would not be thriving, as they currently are. In addition, makes one wonder if Purchasing Power Parity can in fact effectively explain Japan car imports to Zimbabwe and the national valuations of these thereof?
Zimbabwe has had the worst economic downturn imaginable, particularly between 2007 and 2008 with a record breaking recession. Inflationary counter-measures merely plunged the country deeper into turmoil and the combined effects of the Monetary and Fiscal policies put as much as 10 Trillion Zimbabwean Dollar notes in my pocket which however were not even enough to purchase a single basket of groceries. It seems inconceivable that this nation's precolonial currency was equivalent to the British pound and trading higher than the US Dollar. As it stands, it seems Zimbabwe fundamentally evolved beyond the scope of economic theory. Its economy's utopic existence lies beyond the protective confines of hypothesis and principles. Predicting our economic future as a nation seems somewhat arbitrary at this point and would give even renowned economists a few grey hairs.
I probably would be more inclined to be optimistic had i attended Economist John Robertson's outlook of the Zimbabwean economy and the opportunities ahead at the
Whatever the future holds for this economy, a repeat of 2007 - 2009 just is not acceptable.
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