Return of the Zim dollar?
Facing serious funding problems, the Zimbabwean government may switch on the money presses again.
The Zimbabwean government is seriously contemplating bringing back the country's troubled Zimbabwe dollar, impeccable sources in the banking sector and the government have told the Mail & Guardian.
The move is being considered to rescue the embattled government from a funding crisis precipitated by a liquidity crunch that now threatens to undermine government operations. But it could spin the economy out of control and trigger a crisis.
Zimbabwe abandoned its currency in 2009 after it reached unmanageable levels of inflation.
The M&G this week spoke to a banker and two top civil servants, who confirmed the plans to reintroduce the currency. They said the government, which has been unable to pay civil servants' salary increments, overdue by four months, is seriously underfunded and it is considering bringing back the Zimbabwe dollar as "an easier way out".
Some Zim dollar notes were printed in October and November 2013, a senior official at Fidelity Printers and Refineries said. They were all high-denomination notes, with the biggest being $10-million.
"Everyone involved in the printing was asked to sign confidentiality assurances, but I can tell you we had some notes printed in November. The Zimbabwe dollar is coming back," the source said.
Another source working for the government said the issue has been discussed by some of President Robert Mugabe's lieutenants. The source could not say whether they included Finance Minister Patrick Chinamasa.
"At the moment, I don't think it has come to a point where it can be publicly discussed, even within the ruling party's politburo. It's a sensitive issue," the source said.
A central bank official declined to deny or confirm the plans, asking only: "Would it be a bad idea bringing it back?"
Another government source said the government's financial situation has become so dire that it now finds itself in arrears with the compulsory pension fund, the National Social Security Authority and the public service pensions and health insurer PSMAS, which it owes more than $6-million for 2013 alone.
"The government has been deducting NSSA and pension contributions for civil servants, but has not been remitting them. There are arrears for the agreed salary levels, which have been promised for the end of April, but current revenue levels will not sustain these," the government source said. He said Mugabe's government had initially hoped to raise money from the alluvial diamonds being mined in Chiadzwa, but these appear to have been depleted.
The mining of conglomerate diamonds will require a major investment, which the government and its mining partners in Chiadzwa do not have, he said.
"The Zim dollar will, therefore, be a quick solution but the tragedy is that it's a seriously short-term plan. But who has a clue about raising cash to get the economy working? It's getting desperate," he said.
Chinamasa's cellphone was not answered when comment was sought. But in the past, he has repeatedly said that the Zimbabwe government is not considering bringing back the Zimbabwe dollar. He told captains of industry in December that the question had begun to annoy him.
"The multicurrency system will remain for the next five years. I do not want to continue being asked that question. It is going to be a multicurrency regime," he said.
The acting governor of the reserve bank, Charity Dhliwayo, also ruled out the return of the Zimbabwe dollar. In her monetary policy statement issued in December, she increased the number of currencies that can be used as legal tender, bringing the total to seven. Zimbabwe uses the United States dollar, the South African rand, the Botswana pula, the Japanese yen, the Chinese yuan, the British pound and the Australian dollar.
Mugabe himself has not closed the door on the possibility of bringing it back. Speaking during campaigning last July, he said that he had been working privately with former reserve bank governor Gideon Gono to bring it back, backed by gold reserves.