“Until Zimbabwe addresses the root causes of its economic woes – political instability and a lack of growth – the cycle of devaluation will continue.” Picture: Reserve Bank of Zimbabwe
This week, Zimbabwe introduced the ZiG, its latest attempt to tame inflation through a new currency. While a fresh start might seem appealing, history offers a cautionary tale: Simply printing new notes isn't enough.
Until Zimbabwe addresses the root causes of its economic woes – political instability and a lack of growth – the cycle of devaluation will continue.
Inflation, the monster Zimbabwe has been battling for decades, has once again reached nightmarish proportions. Prices soar, savings vanish, and basic necessities become luxuries. This isn't just about numbers on a page; it's about people struggling to put food on the table.
The introduction of the ZiG disregards a fundamental economic truth: A currency's value is a reflection of trust in the issuing authority. Years of mismanagement have eroded that trust in Zimbabwe. Businesses are hesitant to invest, and citizens hoard foreign currency, further weakening the local tender.
The real solution lies not in tinkering with the currency but in building a stable and predictable environment. This requires political will to address corruption, uphold property rights and foster an environment where businesses can thrive. Without economic growth, there's nothing to back the new currency, making it as susceptible to devaluation as its predecessors.
Zimbabwe isn't alone in this story. Many countries have fallen prey to the allure of a quick fix through currency manipulation. Argentina, for instance, has a long history of “pesofication” – introducing new currencies with multiple zeros lopped off – yet inflation continues to plague its economy.
In South Africa, politicians who want to raid the Reserve Bank in the hope they are better at managing monetary policy need look no further than Zimbabwe. That country’s reserve bank is controlled by President Emmerson Mnangagwa, an octogenerian, who this week promised he won’t seek a third term (perhaps to calm market fears).
The path to economic recovery is arduous. It requires tough decisions, commitment to transparency and a focus on long-term growth strategies. Zimbabwe needs to move beyond the charade of new currencies and address the underlying issues that threaten its economic stability and, ultimately, the well-being of its people.
* Quinton Mtyala, is the Western Cape Regional News Editor.
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