Listening to Gideon Gono’s mid-term budget monetary statement
This blogger listened to the radio today in amazement…
Part one aired on the radio this morning was a brief monetary statement from Gono – a digestible 20 minutes. Part two was a long, boring, dragged out drone from Robert Mugabe.
“Food Security: the Answer to Disinflationâ€Â – this grand statement is the title for Gono’s mid-term budget.
Gono started, with his normal salutations to the representatives of government, journalists and diplomats. He even had the grace to thank representatives of both formations of the MDC when he said to them, “Welcome, this is how it should beâ€. But he showed his true sycophantic colours with his demand that a special round of applause be awarded to Mugabe, the special guest, whom he admitted is under extreme pressure.
Gono went on to emphasise that the future of the economy is dependent on political stability. Predictably, he laid the blame of the country’s economic woes on sanctions, the tired and worn excuse dredged up by those in power at every possible opportunity to absolve themselves of any responsibility. He ended with the hackneyed warning that those in the international community, our enemies, are keen to see Zimbabwe fail.
Finally Gono got to the meat of the budget.
Cash Limits
Gono lamented the voices that have accused him of manipulating cash limits, and he cannot understand the criticism. He levelled blame for the shortages squarely on the shoulders of the German paper suppliers, with their ‘illegal refusal’ to supply paper already paid for, but he is happy with the solutions they have come up with.
The Governor made a puerile attempt at humour when he claimed that he too has lost zeroes, for he is now being called Gideon gn, not Gono, and his family are gn 1, gn 2, gn 3, gn 4 and gn 5.
Lets hope he will soon be Gone – oh.
Finally he got to what we have all been waiting for – the great zero slash. This has been made critical as banking systems are unable to cope with the number of zeros required. (ZSE collapsed last Friday for that very reason)
Z$10 billion will now be valued as Z$1.
A new currency is also to be launched from the above date, so no more bearer or agri-cheques (which are easy to counterfeit) will be accepted from December 2008.
| New currency | Old cheque value |
| $500 | 5 trillion |
| $100 | 1 trillion |
| $20 | 200 billion |
| $10 note and coin | 100 billion |
| $5 note and coin | 50 billion |
| $2 note and coin | 20 billion |
| $1 note and coin | 10 billion |
| 50c | 5 billion |
| 20c | 2 billion |
| 10c | 1 billion |
The biggest laugh is for those people who did not throw out the erstwhile useless coinage from long ago, which Gono stated was never demonetised and will now be back in circulation as legal tender. Gono mentioned specifically people who either threw away these coins or gave them to domestic workers.
Dual Pricing
All retailers will be required to display prices in old and new values until December.
Cash Withdrawals
The maximum has been extended to $200 (ie $200 trillion) and he quipped that the only limit will be how much one has in the bank.
Export Promotion Growth
As of 1st August up front market disposal is set at 35-45% and export retention has been reduced to 55%. FCA’s have been extended from 21 to 30 days (ie companies have to dispose of any funds in their Foreign Currency Accounts within 30 days or forfeit the sum to Reserve Bank). In layman’s terms this means that exporters will only be allowed to retain 55% instead of the previous 65% of their forex reserves, and the balance has to be “given†to the reserve bank for their use at the interbank rate, which is now at about 70% of street rate.
This move will NOT be welcomed by the few exporters left in the country as they are having money taken away from them once again.
Financial Sector
There has been an increase in minimum capital requirement to between 10 million to 12,5 million depending on the type of financial institution you are.
Inflation
Gono clearly stated that the only cure is increased productivity, especially in agriculture. He is mobilising inputs by using the Bakosi framework to distribute implements, fertiliser etc. On Monday they gave the fertiliser industry $3 million and they foresee a huge increase in productivity.
Social Contract
The government will have to continue to control prices but Gono says that the Bakosi system will ensure that all are taken care of. Unfortunately the Bakosi shops will have to rely on imports but will not favour them. The launch of a mechanisation programme will apparently ensure that by 2010, 70 – 80 % of farmers will have access to equipment.
Gono ended his presentation with some philosophising of the choices Zimbabweans can make: to take the road to success or the road to victimhood. He once again placed huge significance on unity, within civil society and in government, but said Zimbabwe faced the maximum dangers from the international community. He recalled the spirit of liberation, that we are “our own liberatorsâ€, that we need to show our detractors who want to see us fail that we can choose the right way.
Finally Gono “committed to God’s hands†the monetary statement.
July 30th, 2008 21:53
As long as ZANUPf is killing people, the economy will never know peace. The people are the economy. Gono should have addressed Mugabe that it does not solve the economy by killing MDC people so that ZANUPF people only remain in Zimbabwe. Even if Mugabe alone remains, the economy will be after him. Respect of life and rule of law are the basics of a vibrant economy. Mugabe must learn this. Sorry Rob you will never no peace.
July 30th, 2008 23:48
Excellent! Now relativity of the $20 loaf of bread and $15 taxi fare to the $200 wage (of a civil servant) will be readily appreciable to even the least mathematically minded. The impoverisation of the worker and unemployed Zimbabwean alike will pop into stark reality.
These moves, of course do nothing about inflation, which will dictate that inevitably a zero will sooner of later (probably sooner) creep onto the end of that bread price and taxi fare. Then, and I may stand corrected if wrong, in effect 11 zero’s will have been surreptitiously added – and that’s even ignoring the 3 zeros Gono lost in his previous attempt at being a monetary Gideon Scissorhands.
I forsee for a start, the comeback of the .99 ploy, so favoured by traders until the cent lost it’s significance years ago.
I predict that this monetary statement will hasten the demise of ZANU(PF) and strengthen dissent. Ecconomics is one enemy that the JOC cannot beat into submission with a big stick.
July 31st, 2008 10:38
@Malcolm: Hear hear. The stick aimed at Economics falls on our backs, though. When are we going to stand up and face the ones wielding the sticks?
July 31st, 2008 11:13
I recall complaining about the following when 3 zeros were lopped off my measly teacher’s pay – the effect is magnified by a much greater factor;
Consider an amount of $4895500000, say for a bought item. There are no fractions of a cent so it now becomes 49 cents. In effect the trader has lost the equivalent of $4500000. And because no-one likes to lose money the item will be rounded up to the new $0.50. In one fell swoop item will have a price increase of $104500000.
Apply the same effect to an bank account, where obviously the error will be in favour of the bank. Add the un-resolved ‘gains’ for multiple accounts and there is going to be a substantial amount of money with no owner – until some enterprising banker pops all the accrued rounded down figures into an account of his own.
Mathematics was not my teaching subject – computers was. If the banks will maintain all the decimal points the system will crash all the same. The software falls short on recording digits, irrespective of where the decimal point falls. To be sure, trailing zeros will be superfluous.
All the same, an error by a factor of 3 was bad enough, now there will be an additional error by 10.
July 31st, 2008 16:12
Do these people realize that there is no international sanction on Zimbabwe at all (except the arms embargo)? I mean that the only sanctions have been taken against individuals in the ZANU-PF that are known to have multiple murders on their conscience. That includes Mugabe, of course.
July 31st, 2008 22:43
Re sanctions – consider the duplicity here;
Mugabe is believes it’s his sole right to determine who can be graced with his patronage; who he wants to observe his elections, which journalists can write about what he wants, which judges should do his bidding to whom, who should be arrested and persecuted, who should be immune from the law, what rules he wants to set, and what lies he wants to be taken for truths.
If the West tries to exercise their right of dis-association they are meddling, colonialistic-minded racists.
August 1st, 2008 03:00
He can’t lop the 6 or 7 zeros off the rate of inflation…