Neither Minister of Finance and Economic Development Prof Mthuli Ncube nor Governor of the Reserve Bank of Zimbabwe Dr John Mangudya have made any secret of the plan to introduce a Zimbabwean currency within a year after markets have settled and the necessary steps have been taken.
So it is difficult to understand the chorus, well small choral group, of voices of those who seem to be taken by surprise by the latest Ministerial confirmation that this step is still on the agenda although not tomorrow.
The journey to the new local currency is in progress. It will, obviously, be a further development of the RTGS dollar, although we hope that a snappier and more attractive name is chosen. Already the RTGS dollar is the general unit that prices are quoted in, business accounts are kept in and taxes are collected in, unless the taxes are levied on those using another currency or are importing certain consumer goods.
We would assume the journey will continue step by step until the final step is taken and an official local currency is in place.
The first steps were taken last year when exporters and others with hard currency had their US dollar and RTGS funds separated into separate bank accounts. Then in February this year the next step came, with the RTGS dollar moving from a unit of account to a currency within the multi-currency regime and an interbank market being set up to allow trade between RTGS dollars and US dollars for businesses.
At each of these stages it has been necessary to make adjustments to the initial policy, particularly in regard to the retention percentages allowed to exporters and those who produce export goods and to the time limit on when the unused retained export earnings have to be sold in the interbank market. The fact that the monetary and fiscal authorities are willing to adjust, shows a lack of dogmatism and a welcome pragmatic attitude.
Already everyone has learned that a local currency is not a disaster, and that the memories of the crash of the old Zimbabwe dollar are not prophecies of what will happen when its replacement goes live. The interbank market is working, although we understand that banks are seen as less enthusiastic participants than was expected, largely because it requires some hard work now to generate profits.
Prof Ncube has gone almost nine months now with his zero-deficit budgeting, building confidence that money supply is not going to grow in RTGS dollar terms and thus, with the burst of corrective inflation we saw from October last year to February this year, the inherited bulge in monetary supply has been sharply reduced in terms of purchasing power and exchange rates.
The interbank rate is still drifting slowly down, but part of that is because those retaining surplus export earnings are slow to liquidate these and place those US dollars onto the interbank market. But as those with retained earnings buy their required inputs many are going to be running into cash flow problems unless they start selling the US dollars left over, and the only place to sell is on the interbank market.
As we move towards a new local currency the whole concept of retained earnings changes dramatically and no doubt these conceptional changes will become apparent in the monetary and fiscal policy statements over the next year. Most countries demand that export earnings are converted to local currency fairly promptly; South Africa for example gives exporters 30 days.
The second concept change is already in progress. Accountancy rules give clear guidance to Zimbabwean businesses over how to account for foreign debts and how to calculate exchange rate risks. These are now being fed into business accounts without any trouble, although some are startled at how much their profits may have been inflated by the fiction of a 1-1 exchange rate. But this crucial step has already been taken and accounts are now accurate and follow world standards. Interestingly for those having difficulty in thinking about a local currency, the accounts systems assumes that the RTGS dollar is already a local currency and follows the international rules and best practice in dealing with this.
The third change will be a movement towards all prices of all goods and services in Zimbabwe being quoted in RTGS dollar, a diminishing of the multi-currency system. Eventually, in the last step, those still in other currencies will have to be quoted in the new local unit, but by that stage with the step-by-step process being followed this will be a small jump.
There are some relatively minor points to work out. One will be whether Zimbabwe should have notes and coins. We are now the world leader in moving towards pure digital money and a return to the old days of people carrying bundles of cash and standing in queues to get banknotes will seem as weird as queues at the post offices to buy stamps to put on letters.
But it would not be a bad idea for the monetary, fiscal and telecommunications authorities to start putting a little pressure on banks and mobile-money operators to iron out some irritating procedures so that digital transfer can be instant, safe, secure and simple.
Already mobile money transfers are much easier in supermarkets thanks to a software upgrade that simply requires a customer to enter a phone number in the till pad and then the PIN on the phone; but elsewhere it still requires users to start punching in a series of numbers separated by stars or, even slower, use the alternative on a smart phone to continually send a number. We would assume apps can be generated that can and should make life a lot simpler while still retaining a basic system for those using older phones that cannot run apps.
And we need something that allows simple digital transfer of bus fares and basic vendor purchases, perhaps a simple card that can be loaded with a few dollars and just tapped to transfer small sums. Security might be slightly lower but then thieves are unlikely to risk jail to steal a $5 card.
In any case bond notes and coins are likely to be still in circulation when the new currency is introduced and there are enough around for small transactions and so can be retained. A $2 coin though would be useful.
The point we are making is that the Minister and Governor are talking about a year, not Easter. Clearly they will welcome debate and constructive suggestions before the final steps are taken. They have already shown they are flexible as they put each part in place and that they are willing to listen, or at least willing to listen to clear, reasoned argument.
So everyone should remain calm and start thinking about what changes and what does not change in the progress towards a local currency and then start making practical and sensible submissions of what they see as essential elements in that journey.