Reserve Bank of Zimbabwe governor John Mangudya says he has been praying for Zimbabweans to understand economics. Zimbabweans, in turn, have been making the same prayers – for him.
Testifying on Wednesday before Parliament’s budget and finance committee, a frustrated Mangudya said: “I pray for Zimbabwe each morning, saying, ‘Oh God, help Zimbabweans understand economics’”.
Why does he think we all need prayer? In his view, all this economic instability comes down to mysterious demonic powers that, he says, cause Zimbabweans not to trust their own currency.
“There’s a demon in this country causing economic instability,” Mangudya said. “The rate changes in the minds of people, there is no country that does not have a parallel rate, but the parallel rate in Zimbabwe changes frequently. Why can’t it be stable?”
Why can’t it be stable? Well, Mr Mangudya, where to begin? Firstly, currencies these days are backed largely by little more than public confidence and trust. This is trust not only in the currency itself, but in those managing it.
For Zimbabweans, how are they to have confidence in a central bank governor that likens the markets to “Sodom and Gomorrah”, as Mangudya did, while offering no real plan?
In March, Finance Minister Mthuli Ncube appointed a taskforce to manage the exchange rate. This was a signal that even he himself had no confidence in RBZ doing its job. Yet, the Ministry of Finance, on its part, is into a second year of endless tinkering with the currency.
If the government itself has not made up its mind on what to do with the exchange rate, neither should the streets.
Zimbabweans have gone through two decades of currency upheaval.
They still remember the Zimdollar crash of November 1997. They remember the tragicomedy that was the Gideon Gono era of the 2000s, where random bank closures forever destroyed their trust in banking. They remember the rapid currency changes, everything from “agrobills” and bearer cheques. They saw the 100 trillion Zimdollar note.
Mangudya’s arrival was a chance to restore some professionalism at the central bank. Instead, it has been an era of fibs and fiddling. The bond note, for example, was supposed to be only an “export incentive”, people were told.
Under Mangudya, management of forex has been centralised and opaque. Leaks of currency notes onto the black market have become standard, sapping confidence in the central bank, and Mangudya doesn’t appear to have the will to end them.
There’s no doubt that Zimbabwe needs its own currency. Many pine after the US dollar, but, in truth, dollarisation had already long run its course five years ago.
In June 2019, in an interview on CapitalkFM, President Emmerson Mnangagwa said Zimbabwe needed to devalue its currency further, because the local currency – then at 1:6 on the interbank market – was too strong, which made Zimbabwean exports more expensive.
Many misread his statement to suggest he was boasting about ‘a strong currency’. But he was right. At 1:6, the Zimdollar was artificially strong. It needed to be devalued. His diagnosis was right, but some of the steps that Mnangagwa’s government has taken to fix this since then, on current evidence, have been wrong.
One of those wrong steps is to blame Zimbabweans for “not understanding economics”.
Quite frankly, Governor Mangudya, we don’t need to. Ordinary Zimbabweans don’t need to understand balance-of-payments, current accounts and all the other intricacies of monetary and fiscal policy. There are people employed and earning good money to do that for us, and they’re doing a bad job of it.
All Zimbabweans want is the chance to work, earn a living wage, and live in dignity. They don’t need to be economists to see that this is not happening.
On paper, Zimbabwe’s balance of exports and imports should be able to sustain the economy and the currency. But this would happen only if the currency was being managed by more stable hands, ones that we can be confident in.
Zimbabweans do not trust the central bank, or the government, to manage the currency. Those are the actual demons that Mangudya and Ncube need to face.