Zimbabwe's currency crises

On the 27th of March 2022 President Biden declared his country’s intent to damage the Russian economy, he said the Russian ruble would be reduced to rubble, most Western media outlets went on to predict a certain Russian defeat as their contribution to this all out multi faceted campaign against the Russian state. They expected Moscow would be humbled by the sanctions, these efforts working in tandem with the economic and financial burden of the military operations then conducted in Ukraine were meant to degrade the Russian economy by up to 15% in a single year. The combined Nato elites hoped this economic collapse would generate enough discontent within Russia, which would provoke enough social chaos leading to the collapse of the Russian state.

Yet, as we watched to see how matters played out, Moscow responded by taking measures which taught many students of economics valuable lessons. Instead of playing Washington’s financial games the Russian central Bank chose to take measures which supported the ruble, like purchasing rubles of the market using its forex reserves, as a consequence of this temporary measure the ruble stabilised. Then it demanded the Western Nations pay in rubles for its gas supplies inducing demand for the ruble; effectively the Kremlin used Russia’s massive gas reserves to support the ruble. These measures together with others that included a total ban on the sale of assets by foreign companies, temporary curbs on the amount of forex which could be remitted outside Russia and an order to Russian companies to convert 80 % of their revenues to rubles, all designed to support the local currency resulted in the bounce back of the ruble from an initial loss of 40 % in value back to its pre invasion levels of 89 rubles to the dollar, in fact the ruble became the best performing currency in the whole world.

These monetary policy interventions made it possible for Russia to stabilize the ruble and the greater Russian economy. They made it possible for Russia to continue funding its military operations in Ukraine, while the West could do no more than act the vulture and froze its assets, using the excuse that they were owned by Oligarchs who supported the autocrat Putin- whose crime we were informed was to upset what Biden called the rules based order.

When our President in Zimbabwe Emerson D. Mnangagwa saw the effectiveness of the Russian response, he was full of praise for President Putin and claimed Putin was teaching everyone how to beat the Americans at their sanctions game. These events were important to us Zimbabweans considering the fact our government has always claimed the targeted sanctions imposed against our country are responsible for the almost permanent economic crises we have suffered under for over 2 decades. If he was taking notes then perhaps this would equip the ruling elite with new understanding and help them to craft policies which would change the country’s fortunes, yet after two years there is no evidence the government or indeed the whole ruling strata has learnt anything from Russia. It has not adopted a single tenant of Kremlin policy.

In fact there is evidence Zimbabwean elites continue to clandestinely engage the I.M.F and World Bank and take advice from them when we know their prescriptions have never worked for us, they have not moved an inch from their post Mugabe policies trying to engage the West, in the hope of receiving loans and balance of payments support. Yet, the same West loaths them and positively does all it can to make sure the Zimbabwean economy fails. It is a well known fact that the western Capitals desire regime change in Zimbabwe and all Western institutions are committed to this definite outcome in the future, they are working towards this goal using all the tools at their disposal including deceiving gullible technocrats into implementing policies that perpetuate the crises.

2 years after these events the New Reserve Bank governor of Zimbabwe has announced the introduction of a New currency named the Zimbabwe Gold i.e ZiG currency- it replaces the RTGS, the 3rd failed currency in less than a decade, this current currency was introduced according to the new governor Mr John Mushayavanhu on the advice of the World Bank, who incidentally have distanced themselves from the whole undertaking and no mention was made of either Russia or the BRICS alliance.

I believe the Zimbabwean government does not have its priorities strait, instead of its futile attempts at reconciliation with the collective West, Pesident Emerson Mnangagwa should have done exactly what he said he was doing, which is take notes and learn from the Russian experience. The President would have done well to try and understand the Russian Central Bank policies and general Kremlin policies, instead it seams he was merely playing cheer leader. He should have carefully reflected on all measures Russia took to evade Western Sanctions and perhaps go beyond this and learn how Russian leaders run their affairs in general. Yet, he chose to sing praises and in the process got a reward for his service: 50 000 tonnes of free wheet for his starving people and a helicopter for his personal use, both gifts Russians should understand are hardly useful to Zimbabwe. This is not what Zimbabwe needs!

Now let us look carefully at the Russian response to the sanctions regime, it is clear the premise was on saving the ruble, the whole response was meant to maintain the ruble's value, this is important because the local currency facilitates domestic transactions. In Zimbabwe the government behaves in an opposite fashion, and; therefore, easily falls into the sanctions trap. The Zimbabwean government and ruling elite have never appreciated the importance of a local currency as an instrument which must facilitate transactions within the country and the contribution a viable local currency makes to the general prosperity of a Nation. It has never implemented policies which defended the local currency when its being deliberately undermined either by external forces or internal pressures- generally it is willing to allow the currency to loose its value to the point of worthlessness. Our government has become accustomed to introduce a new currency and do away with the old as a means of stabilising a seriously mismanaged economy. This is possible because it is now confident of retaining its position as government no matter how much the peoples standard of living deteriorates, it has absolute confidence to retain the loyalty of the security sector who could possible question its legitimacy, in fact, changing the local currency after a few years has become established state policy, which always bankrupts the people while temporarily allowing the government to reset the economy.

The Zimbabwean government does not seam to appreciate that the commonwealth of a Nation is primarily invested in its National currency, or if it does is simple callous to the fact, the individuals who constitute the government actually prefer the U.S dollar to a local currency, because the dollar gives them access to the wealth, luxuries and pleasures foreign Nations have to offer!

Zimbabwean authorities unlike their Russian counterparts have come to manage the economy as if money is in truth the U.S dollar, they actually implement both official and unofficial means to maximize the amount of dollars they can transfer from the people and state into their private coffers as individuals. This is a model they developed in the past 24 years, in truth they prefer a situation where Zimbabwe uses two currencies because a Zimbabwe which uses both the U.S dollar and a local currency presents them with a permanent opportunity to easily exploit the Nation’s collective ability to generate forex.Owing to the fact that Zimbabwe has large deposits of easily accessible minerals and a large diaspora community; both who earn billions in forex every year, the government can use its right to issue the local currency to print as much as it needs in order to harvest U.S dollars from the market, in fact the Zimbabwean elites are behind the forex Black market, because of this fact they have no interest in a strong local currency, unlike their Russian counterparts they have no use for it.

The primary beneficiaries of this scam are government officials and their foreign and local collaborators. The funds acquired in this manner are externalized to major financial centres like Dubai, where ironically there are spent mostly on luxuries. The craving for actual dollars and the craving for the pleasures that only the possession of dollars can satisfy, have grown into the Zimbabwean elites with the continued economic crises, this means that the demand for dollars from the ruling elites has grown to such a degree that Zimbabweans can no longer satisfy this ever growing appetite, with the result they impose a crippling annual bill on the people and this reality dictates all state policies; in truth to be an elite now means having the ability to acquire considerable amounts of dollars and one needs not concern themselves about the legal justification for having an obscene amount of wealth. In contrast, without denying the corruption which exists in the Russian system the general tendency in Russia has been opposite. President Putin after the chaos of the 90s has managed to introduce discipline into major sectors of Russia’s economic life “the state clearly serves as a platform to satisfy high ideals, it underpins the Russian people’s collective national effort, its currency functions as a facilitator of commerce, whether it may be the mobilisation of civilian conscripts, the manufacture of ordinances, the production of wheet, Gazproms exports of gas, the remuneration of Russian athletes, simple fishing or any other National endevour of a cultural or economic nature”

Until President Mnangagwa makes the decision to try to be patriotic to the Zimbabwean youth, in the same way President Putin is patriotic to the Russian youth, Zimbabwe will not exit its economic crises. This is the fundamental lesson which Mnangagwa must learn from Putin, because we are not dealing with a leader who is failing to implement progressive policies but rather one who is unwilling to consider it because his mind is occupied with other desires.