Biting the bullet

Understandably so for this is an issue of concern to a wide cross-section of the Zimbabwean society; the house wives concerned with the prices of basic commodities and to whose minds a return of the local unity could only spark-off nightmares of a fresh wave of price increases; gilt-edged stock investors interested in real returns as well as large businesses who have had to factor in inflation when deciding how to invest their capital, when ideally business planning would be easier if companies and consumers don’t have to factor inflation into their models.
Many shared an invaluable collection of insights on what could be the way forward. Unfortunately sometimes highly charged rhetoric has been substituted for informed and reasoned analysis particularly by those who don’t understand why it is said there can never be a vibrant economy without sound money.
There was even an ill-advised push for the immediate return of the condemned local currency by the lunatic fringe which accuses government of surrendering the country’s financial sovereignty through the adoption of, among others, the US dollar — the pre-eminent world currency. 
Always finding it useful to wrap themselves in the Zimbabwean flag, the voluble politically confused, insecure and ill-poised with impure motives have repeatedly shot down in flames suggestions for the continued use of the multiple currencies.
Of course, there are no prizes for guessing why. Their main concern in this case is less the direct consequences of the status-quo on the rural poor who can’t access the US dollar as they claim than fear of losing out on the lure of filthy lucre.
With all the speculation, financial jiggery-pokery and wheeling and dealing that went on in 2008, a relapse into a similar chaos would create fertile ground to make easy money. But the status-quo spikes their guns. That is why they would listen to no one and won’t hear any contradiction to their position on the issue.
I am not suggesting though that they should have been ignored. Government has the responsibility to listen, engage and respond to all as it tries to balance different social interests.
Be that as it may, many are unanimous that this is hardly a propitious time to bring back the Zimbabwe dollar. Not without reason. A measure of confidence is returning to Zimbabwe, long considered a land of contagion shunned by investors. And the basic rule in business is: Don’t mess with success.
Indeed, the new found stability is still fragile. But industry and commerce are at least starting to look beyond mere survival. It is also true that even with the transitional coalition government there is scant evidence that Zimbabwe is really on the march to a political revolution and therefore gaining international acceptance.
But it is refreshing that the country is being mentioned in the same breath with places considered worthy to do business.  Besides, the feuding politicians continue to meet and talk, in discord but in mutual respect — suggesting there could be a silver lining in that dark cloud.
Up until now the government has been sending mixed signals on the issue. High-profile officials have not been singing from the same hymn sheet. But in a rare show of pragmatism the government, notorious for its costly reliance on abstract principles, last week announced that the return of the Zimbabwe dollar has been put on the back burner, for which it has quickly won plaudits from those free of political strings and partisan obligations.
Naturally, not everyone will fall flat at the first punch and agree that delaying the return of the dollar is the missing piece in Zimbabwe’s gigantic economic jigsaw puzzle particularly coming from a government that has a worrying tendency to flip-flop on several major issues. But there is no denying its broad appeal.  
Desperate to stitch together the fragile fabric of a frayed society, the government that has previously shown no great taste for what is right, to its credit, listened to the voice of reason and influence of realities. It knew that bringing back the defenseless Zimbabwe dollar would not only be ill-timed and shortsighted but would also add to the long list of its strategic mistakes, which for now, reads like a typical story of poor choices and their inherent consequences.
And just as well. At an economic cross-roads, Zimbabwe doesn’t have to be rule, theory or politically driven. It simply has to be pragmatic. Gideon Gono who should understand the sweeping nature of debilitating inflation stated, not in so many words, that only when the country has achieved the highest rate of sustainable growth possible should government contemplate bringing back the Zimbabwe dollar. He indicated an annual gross domestic product growth rate of at least seven percent, among others, should be achieved, before the Zimbabwe dollar is brought back. Anybody with little acquaintance with economics will appreciate why.
It is common cause that the corrosive hyperinflation which ravaged Zimbabwe less than a year ago was symptomatic of an underlying problem — a frighteningly shrinking production base. That’s what has been at the heart of the country economic woes. Yet bringing production in the key sector of agriculture to its pre-crisis levels will neither be easy nor immediate.
Government measures to revive agriculture are just so much snake oil, even though this time around it could have tapped into the US$500 million windfall from the IMF to fund this year’s agriculture season. And clearly, no matter how we desperately wish for it, the economy will not bottom out any time soon.
In agriculture, lies the seed of economic prosperity and self-sufficiency — local economic pride and promise. But there seems to be no vision and clarity of thinking on the part of government on how key agriculture is to the reformation and revival of the battered economy. 
As it is, with biting shortages of critical farming inputs, farmers are left devastated with a psychology of impotence and pessimism. And at this eleventh hour, just as it has done each and every year of the past decade, during which, in an irony of ironies, Zimbabwe has been reduced to a perennial grain deficit country, government is mulling a few input handouts despite the fact that this has proved to be a little more than Band Aid — a temporary solution to a problem. Yet it expects different results!
This brings me to the next reason why I believe it would be pre-mature to bring back the Zimbabwe dollar now. The theoretical relationship might appear ambiguous. But evidence suggests a strong link between the government’s ability to defend the local unit against speculative pressures and macro-economic performance which can only, in Zimbabwe’s case, correlates with agriculture.
However, with the current pathetic production levels, if it brings back the Zimbabwe dollar now, the government will neither be able to stop the building up of inflationary pressures nor holding it in check. Yet taming inflation is the key to economic stability, surplus and security. Put simply, containing inflation is a pre-condition for the highest possible long-run growth of output and income.
Zimbabwe also needs to bring its inflation in line with its major trading partners for the simple reason that inflation normally leads to the depreciation of a currency. Simpler, if less compelling evidence comes from the fact that the depreciation of the Zimbabwe dollar against other currencies over recent years touched off a flight of speculative funds as a bet on the fall of the value of the unstable local unit. 
Coupled with the fact that the choice of a currency has implications for economic growth where stable currencies are associated with higher investment and business confidence, the foregoing makes out a case for putting-off the return of the Zimbabwe dollar in the short to medium-term.