Zimbabwe is on a journey. A marathon. Indeed, sometimes it feels more of a steeplechase. As although the journey has just begun, we have faced a multitude of challenges to overcome already. This was not unexpected. And as responsible economists, you must always prepare to tackle these obstacles.
When embarking on an arduous journey such as the complete reformation and rebuilding of an economy, it is however crucial you know what your destination is. We know what our destination is: It is middle income status. It is prosperity for the people of Zimbabwe.
But knowing your destination is not always enough. You must be willing to deal with those hardships, those challenges, which inevitably crop up on any difficult journey. Most importantly, you must take control of as many factors as possible. You must have control over your destiny.
This week, Zimbabwe took back control of its economic destiny. In fact, it had always been apparent to us that for true stability, stability upon which economic growth can be built, our own currency was necessary. The multicurrency regime was holding us back. Like a headwind for a cyclist who is already peddling up hill, the multicurrency regime had left us exposed to the elements.
In this case, the element was the aggressive inflation caused by the US Dollar pricing. Put simply, we had to take our destiny back into our own hands; we had to take back control of monetary policy to remove that element, and make it up the hill.
Regaining control will first and foremost benefit you, the hardworking Zimbabwean. Our teachers and doctors, our entrepreneurs and cleaners; they don’t earn in US dollars. So why sell in US dollars?
Prior to this move, the vast majority of our hard working Zimbabweans were being discriminated against in what had become a two tiered and unfair economy.
What we had was a situation whereby there were stable and affordable prices for the fortunate Zimbabweans who had access to dollars, and a paralysing high cost of living for the rest of the country. This is not right, and we had to step in.
The inevitable question posed by many therefore is why didn’t we act sooner? Indeed, they would be right in noting that the multicurrency regime is not a new phenomenon.
The answer however lies once again in our journey metaphor. You don’t trek through the desert without the necessary preparations. You don’t cycle up a mountain without the necessary training. And you don’t run a marathon (or steeplechase!) without first making sure you are fit and healthy.
Thus prior to making this big decision, it was crucial for us to ensure that our key fundamentals were first put in place. The beating heart of these fundamentals is our national budget.
Once again it was vital that we gained control over our budget, over our spending; what economists call ‘fiscal’ control. We decreased spending, increased revenues and, for the first time in recent memory, the nation of Zimbabwe is now enjoying budget surpluses.
With the preparations complete and our body ready for the next stage of the race to put Zimbabwe back on its feet, we took it upon ourselves to venture past the next juncture, and move another step closer to our destination.
Abolishing the use of multiple currencies, and making the Zimbabwe Dollar the sole legal tender has always been a key component of our transitional stabilisation programme, and a crucial step in restoring normalcy to our economy.
We will work closely with our colleagues in the various ministries and the RBZ to ensure the correct next steps are now taken to guarantee this move is a success. We must continue to rapidly increase the flow of forex into the interbank market. But this must not be for the few.
Forex must also be made readily available to individuals and small businesses across our nation through organised, regulated, and legal channels.
This should also include the introduction of a new interest rate policy and a monetary policy committee.
Despite the reported complexity of this decision, day to day, not much will change. Zimbabwean workers will still receive their wages in RTGS dollar and bond notes, and when they go to the shops, the food on the shelves will be priced in the same currency.
Government also guarantees that those who do hold Nostro accounts will of course keep their access to those accounts in the currency in which it is currently held.
We therefore continue as a nation on the march forward on our path of progress, quickening the pace to our destination of prosperity.
We are under no illusions about the rough terrain we will face. There will be many more obstacles to face. But by taking back control of our fiscal and monetary mechanisms, by taking our fate firmly in our own hands, we are one step closer to reaching our destination.
Prof Mthuli Ncube Special Correspondent, is the Honorable Minister of Finance and Economic Development