RBZ Governor confirms World Bank influence on currency policy

Zimbabwe’s government has acknowledged seeking advice from the World Bank on its economic model, raising concerns from critics who argue this approach prioritises neoliberal policies over homegrown solutions.

These sentiments arose after Reserve Bank of Zimbabwe (RBZ) governor Dr John Mushayavanhu stated in a viral video that the newly structured ZiG currency was an idea proposed to them by the World Bank.

Dr. Mushayavanhu said, “We didn’t know much about a structured currency. We got a consultant from the World Bank. A lot of the things you’re seeing about the structured currency actually came from the World Bank. So, if you’re going to blame me, you’re actually blaming the World Bank. Maybe they didn’t advise us properly. And if they did not advise us properly, it’s fine. Let’s refine it.”

In response to the RBZ governor, development economist Dr Eddie Mahembe accused the government of practising neo-colonialism, arguing that homegrown solutions should be used to solve the country’s economic challenges.

“Now (Mushayavanhu) is telling us they are implementing ideas from the Bretton Woods Institutions, the very same ones accused by Zanu PF of promoting neoliberalism! Why can’t they galvanize Zimbabweans so that we come up with home-based solutions?” he questioned.

“By the way, there is no special school for the International Monetary Fund (IMF) and World Bank economists. We went to the same schools, were taught by the same faculty, and read the same books and journals!”

Head of Policy in the Zimbabwe Communist Party (ZCP), Benny Moyo, concurred that the governor was pursuing neoliberal policies promoted by the World Bank and local elites at the expense of locals.

“(Mushayavanhu) is admitting inadvertently, of course, that they are pursuing neoliberal policies. It is an indirect admission that this policy is not homegrown, even if it has some elements of being homegrown. It does not emanate from the governor’s office or the Minister of Finance,” Moyo said.

Moyo also questioned the sincerity of Mushayavanhu, noting that he had previously claimed the structured currency was an idea from the Confederation of Zimbabwe Industries (CZI).

“In another platform, the governor said that it was the position of CZI they adopted; then in another platform, he said the World Bank advised them. He is not trying to be transparent in trying to explain the background of the currency because elsewhere he attributes it to CZI,” he stated.

“The bottom line is the structured currency is not from them because when (Mushayavanhu) defends it, it comes out who is really behind it.”

The ZCP policy head claimed it was worrying how “local elites in collaboration with the World Bank are pursuing the neoliberal policies of Zanu PF.”

Another ZCP member, a Marxist thinker, Ian Beddowes, said Dr. Mushayavanhu’s statements revealed that people who run the economy in the government do not really understand how the economy works.

“This is what Frantz Fanon noted right back in 1961: that most African leaders who take over only have an approximate bookish idea of the economy, and this is exactly what we have here,” he said.

“It’s very interesting to note that ESAP (Economic Structural Adjustment Programme launched in 1990) was started by a man with a lot of degrees and that destroyed the economy. Before ESAP, we had an economy that, to some extent, was planned, had strong parastatals but was destroyed. We were told everyone must become an entrepreneur rather than concentrating on production.”

Beddowes explained that production is central to the economy, not money.

“Money is supposed to represent production and be related to production. First, they clearly do not understand the relationship between currency and production. This is an admission that these guys don’t really understand political economy. You can’t listen to the World Bank and IMF,” he claimed.

The Marxist said until production was restored in Zimbabwe, the country should not be looking for its own currency.

“The multi-currency regime we had for a few years in the GNU actually worked very well. The only difference with us as the ZCP is we do not believe the currency of reference should be the US dollar but should be the South African Rand,” Beddowes said.

“The Rand would make it easy for many Zimbabweans living in South Africa to start business and would tie in with the rest of business.”

Beddowes said although the new ZiG currency was prematurely introduced, it had one advantage.

“Producing and printing paper money and saying it’s the equivalent of the US dollar doesn’t work but gold has always been the universal equivalent internationally. Gold represents real production; you have to work to produce gold,” he explained.

“Gold contains congealed labor; a very small amount of gold actually contains a lot of labor. When we exchange things the basic value is determined on how much labor goes into producing it and value is decided by the amount of labor.”

Beddowes added that since price hovers around value, there is a genuine relationship of gold to production.

“So we are not against the use of gold in the long term but we think it’s premature in Zimbabwe,” said Beddows.

Political pundit, Professor Jonathan Moyo, also stressed that government officials must take full responsibility for decisions, not blame consultants as they provided analysis and options.

“Consultants or advisors are professional or technical analysts or experts; they’re not decision-makers, and so, they do the analysis and recommend options, each with its pros and cons or its costs and benefits. It’s the principals who weigh the options and bite the bullet by making a decision to commit to a particular option by having it implemented,” he said.

As such, Prof Moyo said officials as decision-makers, “must always take full responsibility for their decisions by standing or falling with them!”

Meanwhile, Stevenson Dhlamini, an economist and Lecturer at the National University of Science and Technology in the Department of Banking and Economic Sciences, said the governor’s policy announcement was misinterpreted as he was trying to be transparent.

“One of the key elements to ensuring success of public pronouncements is clear, succinct, consistent and coherent policy communication,” he said, adding he believed the “good Governor was taken off context.”

“In his attempt to give emphasis to the authenticity of the policy objectives he referenced the role of the critical stakeholders which are World Bank and CZI.”

Dhlamini said he did not think the governor was abdicating responsibility but was trying to be transparent about the policy design and intentions.

“It is common for Central Banks practice’ to disclose full information to market participants in order to help them make more informed decisions and to have a buy-in into the policy,” he said.

“I think going forward it would be prudent for the Monetary Policy Committee to share minutes of the policy discussions because that is where the intentions of the policy are clearly spelt out for the benefit of the public and elimination of information asymmetry.”

However, the lecturer said despite the Central Bank’s efforts, the market was not yet responding “very” well to the ZiG.

“It is still reflecting a wait-and-see approach. However, big retailers and some government agencies have been part of the early adopters of the policy,” Dhlamini said.