'Mnangagwa presses self-destruct button'

'Mnangagwa presses self-destruct button'
Published: 25 June 2019
ANALYSTS warned yesterday that in its desperate bid to halt run-away prices, government might have pressed the self-destruct button by rushing to introduce the Zimbabwe dollar (ZW$) when all pointers on the ground suggest otherwise.

Economic experts had long advised President Emmerson Mnangagwa's administration to delay the exhumation of the ZW$, abandoned in 2009, until they have achieved the right fundamentals, key of which being the return of confidence and sufficient foreign currency reserves to support the currency.

Zimbabwe National Chamber of Commerce chief executive officer Christopher Mugaga said government has hit the deep blue sea, saying its bureaucrats were being reactive instead of being proactive.

"Zimbabwe, unfortunately, has three major economies: the government, private sector - which has power to determine prices - and the informal market. The informal and private sectors determines the trajectory regardless of what government does. The informal sector holds 70 percent of the business and, together with the private sector, they will not take this.

"The effects are that it will seriously quicken inflation and it will also quicken withdrawals from Nostro accounts and it's purely psychological because people will not know what is coming. Deposits in Nostros are going to go down. The stance they took will only push the RTGS (dollar) out," said Mugaga.

Legal watchdog Veritas said the Statutory Instrument (SI) 142 of 2019 which delegitimised the multi-currency regime is not as far-reaching as its makers perhaps intended.

Veritas said "legal tender" means a currency which, if offered in payment of a debt, discharges the debt unless the creditor and the debtor have specifically agreed otherwise.

"So if a debtor owes a creditor $20, say, the debtor can normally repay the debt by offering $20 in RTGS dollars (because they are legal tender). If however the parties have agreed that the debt should be repaid in US dollars, then the debtor must repay it in those dollars.

"There is no law in Zimbabwe which invalidates a contract that stipulates payment in a foreign currency. Similarly there is no law in Zimbabwe that requires prices to be marked up in legal tender or accounts to be drawn up in legal tender," said the legal watchdog.

Veritas said the new instrument does not specifically forbid contracts that require payments to be made or calculated in a foreign currency, so if shopkeepers mark their prices in US dollars, say, or insist on payment in that currency there is nothing to stop them doing so.

"The instrument has all the hallmarks of a hastily concocted measure to stop the downward spiral of the RTGS dollar against other currencies. Whether it will have any such effect remains to be seen," said Veritas.

MDC spokesperson Daniel Molokele said government is merely dealing with the symptoms instead of tackling the bull by its horns.

"As a party, we are concerned by these short gun measures which are done without consultations…we are planning to sit down together and map a way forward not these short gun measures which will not solve the major problems in this country," he said.
- dailynews
Tags: Mnangagwa,


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