Zimbabwe’s ‘Ponzi’ economy is unravelling
Introduction of new currency won't work unless money is backed by reserves, says Tendai Biti
Almost two decades of profligate monetary policy has destroyed Zimbabwe’s economy and fuelled rampant inflation, twice decimating the savings of its people. Hyperinflation of as much as 500-billion percent in 2008 made savings worthless and led to the abolition of the local currency in favour of the dollar the following year. In 2016, former president Robert Mugabe’s cash-strapped government introduced securities known as bond notes that it insisted traded at par with the dollar. In 2018, it separated cash from electronic deposits in banks without reserves to back them, causing the black-market rate to plunge.
Last week, the government threw in the towel and allowed bond notes to trade at a market-determined level, once again slashing the value of savings. The decision came after the nation faced shortages of bread and fuel, was hit by strikes and protests, and President Emmerson Mnangagwa’s recent drive to attract new investment floundered. “At the root of this is the currenc...