Gideon Gono:Chasing after the Wind
Zimbabwe's faltering economy under seige from record inflation coupled with unreliable energy and fuel supplies has backed the Reserve Bank into an airtight corner. Inflation is set to surpass the 600% mark for 613% setting a record in Zimbabwe's seven year recession. This according to the Herald means that,
The scheme set up last August, allowed foriegn currency holders to purchase fuel coupons in various denominations from the reserve bank at US$1 per liter (approx. US$4.40 per gallon) on a no questions asked basis. This facility often meant that Zimbabwean currency holders (which, since the country is Zimbabwe are a significant proportion,) were many times unable to buy fuel for their cars because the coupons were sold only in exchange for foreign currency. Off course the system was a futile attempt by Gono to lure foreign currency out of the hands of creative Zimbabweans into the Reserve Bank's coffers because the unrealistic exchange rates governing formal trade in foreign currency were so far removed from the real exchange rates that almost all foreign currency dealings were happening on the spurious informal market. So Gono and the government were left out of the trade loop, powerless and most importantly with empty pockets (especially after emptying nation's last foreign currency reserves to pay off their debt to the IMF.)
Don't you just love that about the market system? It alone can circumvent elected officials' and policymakers' authority. The power of the capitalist free market system lies not in the rules they formulate or trade standards they stipulate. The power and magic of the free market lies in the peoples minds were sometimes it can be inaccessible to the Gono's and the Mugabe's of this world especially when they are this bad.
As Gono clamped down harder on "illicit" foreign currency deals, the fuel coupons conveniently lent themselves malleable in the "new" foreign currency trade. People who had foreign currency went and bought more coupons than they needed only to turn around and sell them at the price they would have sold the foreign currency for. It was easy. The irony is that while trade in foreign currency outside of the bank's depressed exchange rates was illegal, fuel coupon sales were so legal people have been posting classifieds in the government mouthpiece the Herald! The coupons had become proxies, another foreign currency if you will. People were making hundreds of millions of dollars in short amounts of time turning around the coupons in this manner. In fact the most popular Mugabe joke we enjoyed last Christmas (as we are so apt to do) was our aged leader's response to questions about the precarious state of fuel supplies in Zimbabwe, he said
Listen up Mr. Gono or is Dr. Gono you are not going to stopping from trading in foreign currency outside of the paltry exchange rates your bank has gazetted. You can't stop us.
Until you are ready to give fair value on the formal market for foreign currency, trying to curb informal or as you call it "blackmarket" activity in foreign currency will remain for you "a chasing after the wind."
Zimbabwe, Zimbabwe Inflation, Zimbabwe Economy, Zimbabwe Crisis,
The minimum required for a family of five to survive — went over $20 million a month.Gideon Gono, the once celebrated now controversial governor of the toothless Reserve Bank has proved beyond any measure of doubt that he is either an uncreative thinker whose mental faculties deny him the ability to save Zimbabwe's failed economy or that he is Mugabe's personal banker and an inept one at that especially when it comes to staving off the country's current crisis until the old man makes his much awaited departure. Gono on Sunday scrapped the foreign currency fuel purchasing scheme which had allowed the precious liquid to trickle into the country albeit errantly essentialy admitting that we the people had once again beaten him at his own game.
According to the Central Statistical Office (CSO), which calculates both the official inflation figures and the Poverty Datum Line, the average five-member Zimbabwe family must now spends at least $7,8 million a month on food if it is to remain healthy.
This average family will need to spend just over another $12 million a month for accommodation, transport to get to and from work to earn this money, fees to educate children at the cheapest Government schools, clothes and shoes.
The scheme set up last August, allowed foriegn currency holders to purchase fuel coupons in various denominations from the reserve bank at US$1 per liter (approx. US$4.40 per gallon) on a no questions asked basis. This facility often meant that Zimbabwean currency holders (which, since the country is Zimbabwe are a significant proportion,) were many times unable to buy fuel for their cars because the coupons were sold only in exchange for foreign currency. Off course the system was a futile attempt by Gono to lure foreign currency out of the hands of creative Zimbabweans into the Reserve Bank's coffers because the unrealistic exchange rates governing formal trade in foreign currency were so far removed from the real exchange rates that almost all foreign currency dealings were happening on the spurious informal market. So Gono and the government were left out of the trade loop, powerless and most importantly with empty pockets (especially after emptying nation's last foreign currency reserves to pay off their debt to the IMF.)
Don't you just love that about the market system? It alone can circumvent elected officials' and policymakers' authority. The power of the capitalist free market system lies not in the rules they formulate or trade standards they stipulate. The power and magic of the free market lies in the peoples minds were sometimes it can be inaccessible to the Gono's and the Mugabe's of this world especially when they are this bad.
As Gono clamped down harder on "illicit" foreign currency deals, the fuel coupons conveniently lent themselves malleable in the "new" foreign currency trade. People who had foreign currency went and bought more coupons than they needed only to turn around and sell them at the price they would have sold the foreign currency for. It was easy. The irony is that while trade in foreign currency outside of the bank's depressed exchange rates was illegal, fuel coupon sales were so legal people have been posting classifieds in the government mouthpiece the Herald! The coupons had become proxies, another foreign currency if you will. People were making hundreds of millions of dollars in short amounts of time turning around the coupons in this manner. In fact the most popular Mugabe joke we enjoyed last Christmas (as we are so apt to do) was our aged leader's response to questions about the precarious state of fuel supplies in Zimbabwe, he said
"Let anyone who thinks there is no fuel in Zimbabwe go lie in the middle of Samora Machel Avenue and will if they are alive after three seconds. If they are not run over by car after that long they can come and tell me that there is no fuel in Zimbabwe."So now we return to life as it was before last August. The informal market is simply going to revert back to direct foreign currency exchanges. Here's the truth about Zimbabwe's informal market,
I've said it many times before and I'll say it again Zimbabwe's "black" market isn't black at all. It is doing what the formal market is unable to do--source funds for some so that they can go on with their lives.In fact we had Gono figured out months ago in this regard. Exactly six weeks ago I opted not use fuel coupons but sell my foreign currency directly. So I called up my good friend "Bruce" who has an office on George Silunduka Avenue, and went over there to make our transaction.
Listen up Mr. Gono or is Dr. Gono you are not going to stopping from trading in foreign currency outside of the paltry exchange rates your bank has gazetted. You can't stop us.
Until you are ready to give fair value on the formal market for foreign currency, trying to curb informal or as you call it "blackmarket" activity in foreign currency will remain for you "a chasing after the wind."
Zimbabwe, Zimbabwe Inflation, Zimbabwe Economy, Zimbabwe Crisis,
