RBZ Doublespeak: Paying For Stuff In USD Is Not Dollarisation But It Promotes De-dollarisation

In October 2018 the minister of finance and the central bank governor told us that money we had earned and deposited as USD was not in fact USD. Some of us had invested in stuff like life assurance and retirement savings in hard currency but suddenly all that was now declared local currency which as at today is worth 30 times less than what it was when we invested.

Since that October there has been a contradiction. The government still demands that we pay certain tax obligations in hard currency. Now they have added passport processing fees to the growing list of stuff we (can) pay for in hard currency. A few days ago there was an outcry when a petroleum company announced that eight of its service stations would sell petrol and diesel in USD.

All this suggests that the Zimbabwean economy is still very much dollarised and probably more so today than it was at the beginning of last year. The way pricing follows movements in the exchange rate emphasises this reality even more.

The RBZ says we don’t understand

Interestingly, the monetary authorities seem not to see this contradiction at all. This is what the monetary policy delivered by John Mangudya, governor of the central bank says:

Allowing the use of free funds within the national economy for the payment of customs duties on selected products, paying for emergency passports, procurement of basic commodities such as food items and fuel, under the direct fuel (DFI) scheme, should not be misconstrued as going back to dollarization, but rather, as common good for the country to promote the inflow of free funds from the diaspora and necessary to buttress the confidence that is needed under the de-dollarisation process.

Logical but dangerous

The position expounded by the Reserve Bank of Zimbabwe is quite logical. However, whenever authorities introduce rules with too many exceptions it results in opportunities for arbitrage and the situation is usually left worse than it was. This will probably not be any different.

Secondly, the divide between people who can survive in Zimbabwe and those who are left impoverished keeps growing and more people are joining the impoverished camp daily. Having a little USD in one’s hands is now a very strong position of privilege.

Holders of USD don’t have to queue for petrol and thus have more productive time at their disposal. They can get passports and be able to access healthcare outside the country when needed whilst those who don’t have forex have to do with local hospitals that sometimes don’t even have pain killers let alone doctors to attend to them.

This is just an example of the mess that gets created when a government starts using doublespeak. Welcome to 1984.