Zimbabwe president mocks own currency as prices soar
Emmerson Mnangagwa says the real time gross settlement currency is not real money, as it continues to fall against the US dollar
President Emmerson Mnangagwa stunned Zimbabweans when he denigrated the country’s real time gross settlement (RTGS) currency his government introduced to try solve the huge money shortage in the country.
Speaking after receiving a $2.5m donation from the US government to help recover from the aftermath of Cyclone Idai, Mnangagwa conceded the currency which Zimbabweans were using for most of their financial transactions was “not real money”.
The cyclone, which also hit Mozambique and Malawi, has killed more than 300 Zimbabweans and left thousands missing.
The president’s startling admission came as the RTGS currency continued to fall against the US dollar last week, leading to yet another wave of price increases of goods and services.
But not many expected the president to publicly downgrade his own currency, which his government until recently controversially pegged at par with the US dollar.
Mnangagwa was quite animated over the US donation, which he seemed to suggest was an endorsement from President Donald Trump.
“The most exciting one [donation] is Trump’s. Do you know Trump? The president of which country? From America? Yes. The ones who imposed sanctions on us. He sent his ambassador and he came with two-and-a-half million,” Mnangagwa said.
“Two-and-a-half million of their currency, not RTGS dollars but the real currency, the real thing. Two-and-a-half million, and they said use this to help yourselves but if you have other needs that you see you might need as well, we have a station in South Africa and we can give you more.”
Last week the US dollar traded at 1:4.5 with the local currency on the black market, down from 1:3.5 the previous week as the RTGS currency continued on a free fall.
Retailers are being forced to adjust prices whenever the rate of the local RTGS currency falls against the US dollar.
At the root of the price hikes is the shortage of foreign currency as industry is struggling to get enough US dollars to import feedstock for production.
Most companies are unable to get foreign currency from the official interbank market, which was introduced just over a month ago.
Since its introduction the official foreign currency market has largely remained a mirage, as it plays second fiddle to the black market which reportedly trades hundreds of thousands of dollars daily through Zimbabwe’s large population of exiles who send money home.
The latest spate of price hikes bears similar symptoms to the pricing madness that has been common since September 2018 and have seen inflation hitting a 10-year high of almost 60%.
In the past two weeks, mobile tariffs, bank charges, commuter fares and fuel prices all went up, while retail stores have also hiked prices of commodities such as flour, rice and beverages.
Power utility the Zimbabwe Electricity Supply Authority also proposed a 30% tariff.
Last week, information minister Monica Mutsvangwa said the government was concerned by the price hikes amid fears that Mnangagwa’s administration was considering enforcing price controls to curb potential social upheaval.
Analysts say the price hikes point to yet another example of failure on the part of Zimbabwe’s government to manage the economy.
“The foreign currency challenges are inevitable because we are not producing. We have an imbalance because we still import too many goods including foods such as soya beans and wheat which we should be able to produce, just like we used to do in the past,” said economist John Robertson.
“I do not see anything much changing if we don’t get the fundamentals right.”