FORMER Reserve Bank of Zimbabwe (RBZ) governor Dr Gideon Gono says he would print money again if given the chance and faced with similar circumstances, arguing that while keeping the money printer busy precipitated runaway inflation and an economic tailspin, the decision averted more dire consequences.
A respected governor during his reign, Dr Gono said if he was given chance and choice between “depriving” the country electricity as the case today – thereby affecting productivity as well as causing daily prices hikes – and causing inflation through printing large quantities of money, he would go for the later.
Gono was appointed by the late President Robert Mugabe as RBZ governor in November 2003 riding on his reputation as a turnaround specialist, particularly his work in lifting then troubled Commercial Bank of Zimbabwe, now CBZ Bank, from the doldrums.
He was given another five year mandate on December 1, 2008 and stepped down on November 30, 2013 after completing his 10-year term at the helm of the central bank although there were manoeuvres to extend his stay.
Under his watch the RBZ printed large quantities of money to keep the economy afloat against the backdrop of economic sanctions placed upon Zimbabwe since 2000. The apex bank reportedly printed money to buy US dollars on the parallel market in order to bankroll key State needs, including critical imports.
But printing large quantities of money to finance unproductive activities was against the advice of global economists. The former Governor is the current chair of the Special Economic Zones Authority, to which he was again appointed by the late former President Robert Mugabe.
Due to effect of runaway inflation, the central bank presided over by Gono demonetised old bank notes on August 1, 2006 and introduced a new currency. Each new Zimbabwe dollar was worth 1 000 old Zimbabwe dollars.
The highest denominations for the new bank notes were 1, 10, and 100 000 revalued Zimbabwe dollars.
On 1 August 2007, Gono authorised a 200 000 dollar denomination. This marked the start of a series of new denominations issued in rapid succession, including 250 000, 500 000, and 750 000 dollar denominations (20 December 2007). Then 1, 5, and 10 million dollars followed on 16 January 2008; 25 and 50 million dollars on April 4, 2008; 100 and 250 million dollars May 5, 2008; 500 million and 5, 25, and 50 billion dollars May 20, 2008; and 100 billion dollars July 21, 2008.
From the time of currency revaluation to the beginning of June 2008 the money supply in the country increased from billion to more than quadrillion, or a
20 000 000 fold increase; forcing the country to dollarise in February 2009.
As the economy turned on its head amid hyperinflation, several banks and financial institutions in general collapsed as did companies from across various sectors while goods disappeared from supermarket shelves.
A good number of economic ills, including savings lost and pension values eroded, that the country is battling today can also be traced to the era of Gono’s unorthodox and non-textbook economic policies and strategies.
But the former central bank chief was defiant when making a speech at a recent awards ceremony for notable achievers in the Norton, which were organised by Norton Independent Member of Parliament Temba Mliswa.
Dr Gono said if he had to make a choice between having “dead bodies every day”, what he superlatively termed “inflation of dead bodies” and monetary inflation, he would settle for the latter like he did in his time as RBZ governor.
That, however, precipitated an economic meltdown, which decimated the economy by about 50 percent over the decade to 2008.
Dr Gono said he chose “monetary inflation” rather than “inflation of dead bodies” and drew parallels between availability of key essentials such as electricity, fuel, medical equipment and medical drugs during his time and the current situation in a manner that suggested that he considers his era to have been better.
In defending his decision to print loads of Zimbabwe dollars that fuelled an already volatile economic situation, Dr Gono said there are two forms of inflation; “One that can kill you and the other you can live with and correct tomorrow”.
“I was faced with a situation where I could have left or let inflation be at even zero percent and fold my hands and not even print a penny during my tenure, but what could have been the consequence of doing that?”
Dr Gono claimed he made an unpopular and tough, but necessary decision to run the printing machine relentlessly, which had dire consequences of record high inflation of any country or region outside a war zone.
The former central bank chief said when he made the decision to print money the country was under a battery of western sanctions by the US and its western allies. Inflation rose, at the last official count in July 2008 before dollarisation the following year, to 231 million.
“What would have been the situation in an environment where the country did not have foreign exchange? Foreign exchange to bring in fuel; I know we had our own challenges with fuel queues; well I am not going to compare the two periods. I live it up to you.
“I know we don’t make medical drugs; neither do we make medical equipment. I know we had challenges with doctors; I would go out there and engage them. I am not going to compare that period with now.
“We have never had, as a country, enough electricity to sustain ourselves. We have always had to import electricity in an environment where we did not have lines of credit from outside the country; in an environment where exporters were not doing that well and yet we needed electricity. What was I supposed to do?
“I am not going to compare my period and today. But one thing is sure. You did not work up at mid night to do your ironing. We had a situation, which we also have right now, where we could not provide ourselves with water treatment chemicals. I know we ran out of water, but am not going to compare now with my period.”
Dr Gono said there was a situation when he had to make a choice between having dead bodies every day and monetary inflation. “I chose to have monetary inflation and keep people alive,” Dr Gono said to applause.
“What is inflation after all; inflation if we broaden our definition is the change that has happened between today and yesterday. If we had say 10 people dying because of cholera or lack of drugs, if we had 20 people tomorrow and 30 people next; what is rate of inflation; it would go into billions,” Dr Gono said.
The former central bank chief said he could not risk even for a day a situation where he would allow people to die just to keep inflation low because “I did not know what happens when you die, whether you come back or not.”
Dr Gono said when making the decision to print cash to pump into the economy he was aware that political and perception issues were also the cause of high inflation in Zimbabwe and once addressed prices would stabilise.
Indeed, he said when the Global Political Agreement was signed on September 8 2008 between Zanu-PF and two Movement for Democratic Change formations — which led to the formation of the inclusive Government–inflation and parallel market exchange rates plunged nearly 50 percent without him withdrawing any money in circulation.