The Chaos of Zimbabwean Currency Regime

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By: Farhah Aziz

January 20th, 2017

Zimbabwe; a landlocked country known for Victoria Falls, Robert Mugabe and indeed the hyperinflation crisis. Who hasn’t heard of the infamous phase of hyperinflation crisis plaguing the country in the late ‘90s stretching into early 2000s? The annual inflation rate was indeed extremely staggering with a record high, 500 billion per cent as of 2009, ranked the highest in the world.

So, what has caused this economic chaos to happen in the first place and where is this southern African economy heading to in the future?

“Indigenization” Policy of Mugabe

Zimbabwe is a relatively young nation, earning its independence from Great Britain in 1980. Formerly known as Rhodesia, the southern African nation bordering South Africa and Botswana is rich in mineral resources such as gold, copper and iron. At the time of independence, the country experienced rapid and healthy economic growth with 1 ZWD (Zimbabwean Dollar) being equal to 1 USD by emphasizing on export of its highly-prized natural commodities; particularly its thriving tobacco industry.

However, 1980 also saw the ascent of the then 56 year old, Robert Mugabe into power which has continuously ruled the country ever since. Mugabe was among many other negative adjectives associated to him, nonetheless a visionary man. He envisioned an independent Zimbabwe that possess an economy that is inclusive of all, most especially the majority Black population which was historically heavily marginalized economically under the British colonial policy which strongly favored the white population. The white population was granted farmlands and equipped with technical skills to run the Zimbabwean economy. Hence, Mugabe embarked on a wealth-distribution policy, by indigenizing the economy, something similar to the affirmative action policy of Malaysia, though very much a symbolic feature of Mugabe’s style.

The redistribution which took place in 2000 was marred by heavy violence, with forceful farmlands grabs and eviction policy imposed upon the white population by the authorities. Farmlands were then redistributed to the black population which was ill-equipped with technical skills necessary to maintain the productivity of the farms. As a result, the tobacco industry dwindled and the economy consequently stagnated, verging on the point of collapse.

Printing Money in Paying-off Debt

To remedy this, Robert Mugabe demanded the conventional financial assistance from the International Monetary Fund, therefore signing up to the subsequent Economic Structural Adjustment Program (ESAP), having to exercise fiscal prudence by cutting public spending and increasing tax rate. However, Mugabe’s government which was heavily riddled with corruption scandals coupled with the costly business venture in the neighboring DR Congo as well as the reluctance to adhere to ESAP has only dramatically reduced Zimbabwe’s capacity to pay off its debt that is only accumulating by the day. As of 2016, Zimbabwe owes the IMF, World Bank and Africa Development Bank a total of 9 billion USD.  This has resulted in an economic collapse in the form of chronic unemployment – 80% of its adult population is unemployed, a shrinking manufacturing sector and almost half of its population in dire need of food aid to survive.

Its non-compliance with the ESAP, delayed resettlement of its debt as well as the alleged corruptions scandal and violation of human rights, through the excess use of violence on peaceful protests were deemed sufficient for the imposition of economic sanctions by Western nations and financial institutions upon the nation.

To counter the economic impacts the sanctions had, Mugabe took a step that every decent economist warns of coming close to: printing more money. Lacking basic economic knowledge of such a step and perhaps fueled by his own ego, the increased amount of money in circulation meant that prices of goods and commodities dramatically spiked, causing hyperinflation. Take this, at one point; a single egg may cost you more than 1 billion ZWD.

Multi-currency Regime

Zimbabwe’s long-standing ruling party, the Zanu-PF, realized the magnitude of insane hyperinflation suffered by Zimbabwe and decided in 2009 that it’s time to call ZWD a day, although not definitely. A multicurrency system reigned with 9 currencies in circulation, the most popular being American dollar, South African Rand, the Euro as well as Chinese Yuan, Japanese Yen and Indian Rupee slowly gaining ground.

The multicurrency regime did not start in 2009. In fact, it has been used simultaneously with ZWD, predominantly in the black market even before the abandonment of ZWD due to their stabilities that tremendously help with import activities. However, there is a limited supply of them and before they knew it, they were running out of them.

Today, however, in a bid to ease the economic pressure and to boost exports, the Mugabe government has introduced another currency; the bond notes with an official exchange rate of 1:1 to the 1 USD.  The reaction of the population is somehow rather mixed with some of them applauding the government’s move to increase liquidity in the currency market while some are a bit more doubtful of the longevity of the currency and feared of the same hyperinflation chaos ravaging the country just a couple of years ago.

The Future of Zimbabwean Economy

Monetarists asserted that the worth of a currency relies primarily in the value and the faith that the people put in them. It is a bit like a belief system. Constructed out of thin air and not pegged to any mineral commodities as previously done with gold and silver, the value of money can fluctuate and can occur wildly so too, as demonstrated by the hyperinflation crisis of Zimbabwe.

The hyperinflation crisis suffered by the country shall serve to us a lesson that no, printing more money cannot solve your problem. In fact, it might only exacerbate it, again as exemplified by the economic collapse of Zimbabwean economy.

The real cost however is not paid by elitists such as Mugabe and his business mogul friends, but, by average hardworking citizen of Zimbabwe who might have to go by a day not eating, simply because they cannot afford the rise in price every 5 hours. This chaotic state of economy which stems from economic mismanagement and lack of fiscal discipline only creates more social and political instability in the form of street protests, anarchy and to some extent, may breed conflicts and wars.

The future of Zimbabwean economy essentially lies in its leaders taking more responsibilities in sorting out the mess that they’re in, rather than introducing a new currency or printing more money. And perhaps, it is about time that we see someone else holding the presidential post and unless real democracy is installed into the long-suffering country, the future of this country shall remain bleak and unpredictable.

Sources

ZIMBABWE’S NEW ‘CURRENCY’: WHAT YOU SHOULD KNOW ABOUT BOND NOTES. http://europe.newsweek.com/what-you-should-know-about-bond-notes-zimbabwes-new-currency-526003?rm=eu

How Bad Is Inflation in Zimbabwe? http://www.nytimes.com/2006/05/02/world/africa/02zimbabwe.html

Zimbabwe swaps hyperinflation for deflation with the use of US Dollar. https://www.ft.com/content/9eb1c2d8-c341-11e5-b3b1-7b2481276e45

New Zimbabwe Notes Stir Memory of 500,000,000,000% Inflation. https://www.bloomberg.com/news/articles/2016-10-21/new-zimbabwe-currency-stirs-memory-of-500-000-000-000-inflation

Mugabe launches new currency in ‘last gamble’ for Zimbabwe https://www.theguardian.com/world/2016/nov/28/mugabe-launches-new-currency-in-last-gamble-for-zimbabwe

A worthless currency. http://www.economist.com/node/11751346?story_id=E1_TTSVTPQG

Bitterness and unease in bankrupt Zimbabwe. http://news.bbc.co.uk/2/hi/programmes/from_our_own_correspondent/8551616.stm

Mugabe’s costly Congo venture. http://news.bbc.co.uk/2/hi/africa/611898.stm

Zimbabwe inflation hits new high. http://news.bbc.co.uk/2/hi/africa/7660569.stm

Zimbabwe’s multi-currency confusion. http://www.bbc.com/news/world-africa-26034078

 

 

 

 

 

 

 

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#Brexit

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Britain has voted to LEAVE the EU. Watching how it all unfolds to this shocking and unexpected result, Britain will need your much-needed prayer to steer through times of economic and political uncertainties in the near future. This ‪#‎Brexit‬ signifies something greater though. It signifies the real potent force that right-wing nationalist politics can have on a society. It demonstrates clearly where fearmongering of others can lead a nation to. It can lead you to dehumanize others as mere statistics. ‪#‎Immigration‬ And when Donald Trump has praised you for this kinda move, you know you’re in for a real treat! Ah, the liberal Labour me!

This post is taken from a previous Facebook post dated June 24th, 2016.

We have a lot on our plate! #InternationalWomenDay

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So its ‪#‎InternationalWomenDay‬ huh?

Lately a thought has been lingering in my head; women these days have so many things to juggle simultaneously…..

I mean, not only are we expected to be on top of the class now that we have a right to education compared to our predecessors and our unfortunate fellow sisters in different parts of the world, once we graduate, we also have to think about getting a job, a good job also, taking into consideration the tough economic condition facing the world these days. Based on a discussion that I had in my class today, apparently only 40% of Malaysia’s workforce are women, in comparison to more and more women getting a university degree these days. In other words, we sisters, ought to weigh our muscles too in helping grow the economy. Wow. *sigh*

Alongside a job, those who take up education loans will have to think of ways to repay the loans. We gotta learn about and also pay the insurance, countless number of bills; electricity, water, phone, etc. And of course, you would also be expected to get a house and a car (convenience they’d say) and the list goes on and on. *more sighing* This is all on top of how obscenely erroneous reality has been portrayed by the media (dramas which shows you’ll land a CEO position of your papa’s corporation the moment you graduate. Seriously?! Malay drama man!)

And then surely as expected of your society, you will get married. And nope if you think responsibilities are about to lighten up once you said “I do”, you’re sorely mistaken. Its true. You will have a company, a team partner that by the will of God who would be sharing the duty of marriage alongside you, but there’s certainly more on the plate. You will get pregnant. Your body will change. For 9 months, your womb will become a protective home to another life.And once the moment arrives, let’s admit it, our bodies tear apart in ways we thought are physically unimaginable in order to let another soul to live. Think about that.

I’m not even going to dwell on the enormous pressure that unfortunately plagues our fellow women when it comes to conforming to society’s flawed, unattainable standard of beauty. That’s a topic for another day inshaAllah. But you get the jist right? We have A LOT on our plate.

Look. This might sound like a complain. But, I’m merely stating the reality that women, at least in the context of Malaysia and certainly other parts of the world are facing. So, first let’s drop this whole idea that women are weak because tell me if you can handle, ok maybe not labor pain, hmm maybe our monthly period pain and its complementary emotional instability phase?

What I’m saying is that it sounds nice that just with any other special date of the year, you now have a special date on the calendar just to honor women. But, the truth is, everyday is indeed a women’s day. Everyday is a day in which you honor the presence of your mother, sisters, wives and daughters. Appreciate the different kind of struggles that they go through. Love them and tell them that you love them. Though you might say over the time, you cannot live WITH us, we know deep down, you cannot really live WITHOUT us! *wink wink*

p/s: This post is of course a shout out to my mak, who without her sacrifices, struggles, perseverance, and iron-strong attitude, I would not be the person that I am today and she would not be where she is today. Thank you for everything and I love you mak! Siti Alawiah Siraj

#WelcomeToCanada

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In the face of the bigoted statement made by Donald Trump earlier in the week, banning the entry of Muslims into America, Canada, its northern neighbor today stands lofty in manifesting its humanitarian vows, greeting the entry of Syrian refugees warmly into their arms, setting a high standard for all the other Western countries to race towards. And indeed the choir of “Tala’al Badru ‘Alayna” sends a powerful and significant message to humanity. This very song was originally sung to warmly welcome and celebrate the joyous occasion of the arrival of Muslims fleeing persecution in Makkah. Now, this very song echoed in a choir, a traditionally Western pride of musical ensemble welcoming the Syrian refugees which many countries have shut their borders to, into their new and safe home. This is undoubtedly another level of humanitarian gesture that the world has not seen in a long time. And if you’re aware what a winter weather is like, such a warm gesture will certainly force warm tears down your face :’)

#WelcomeToCanada #GoJustinTrudeau

This was taken from a previous Facebook post dated 13th of December 2015.

 

History is Repeating Itself

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Just as David Cameron decided to ‪#‎BombSyria‬, we will be instantaneously taken to a disgraceful recent past when Tony Blair decided to invade Iraq in 2003 alongside the Americans. Just as much Tony Blair today is not heralded as a war hero and instead a war criminal, Cameron shall inevitably face the same fate soon. Just as much as the moral-voice of Jeremy Corbyn in the House of Commons and the anti-war protests taken place across Britain are drowned out by the need to wage war against “terror” and to protect “national security”, their rational and morally-sound voices shall be recognized and honoured soon and Cameron’s disgraced. The war stance adopted by Cameron today demonstrates the moral catastrophe of a country known for its superb establishment of humanitarian values. Undoubtedly, reactionary, play-on-emotions politics only breeds more insecurities in the world. Terror only breeds more terror.

Indeed, history, if its not learnt is only bound to repeat itself.

‪#‎StopTheWar‬ ‪#‎AllLivesMatter‬

This is taken from a Facebook post dated 4th of December 2015.

A Time of Great Trials

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Any loss of innocent lives has to be recognized and mourned over, whether it happened in Paris, Beirut, Jerusalem, Darfur or Rakhine. The Quran explicitly states:

“….Whoever kills an innocent human being, it shall be as if he has killed all mankind and whoever saves the life of one, it shall be as if he had saved the life of all mankind…” (5:32)

Political grievances do not validate the taking of innocent civilian lives wherever they may be. And the fact that the media attention is predominantly given to the latest carnage in Paris and not in Beirut or to the rest of the Muslim world should not be a source of mockery to the innocent souls that perished and of the griefs felt by their families and close friends. The analysis of why the carnage took place, the indiscriminate media attention granted and what can be done to solve the terrorist activities affecting humanity, be it Muslims or non-Muslims should be actively debated.

This is a trying time for humanity in general and Muslims in particular. The sanctity of our Quran and the pristine reputation of our prophet SAW have been tarnished by those criminals who claimed to represent them. In this time of great fitna, the Muslims need to be more than ever vigilant of the Quranic injunctions and the prophetic traditions that engender love and mercy towards one another. Remember that our prophet SAW was sent as “mercy to all mankind”. The values propagated by our beloved SAW are those that universally appeal to humanity at large and not just the Muslims. It is upon us to exemplify his prophetic traditions in order to overcome the waves of trials ahead of us.

And Allah knows best.

This was taken from a previous Facebook post dated 16th of November 2015.