Gideon Gono’s Reappointment – A Monetary Policy Hurricane in the Making

Thursday, November 27, 2008

By Rejoice Ngwenya, Harare, Zimbabwe

Rejoice Ngwenya Dr Gideon Gono’s tenure as central bank governor of Zimbabwe has been extended by another five years, amid hue and cry that President Robert Mugabe is plugging the holes of possible monetary policy impropriety investigation by a new government. Most political analysts are alarmed that Mugabe’s hasty decision comes at time when the opposition MDC with Parliamentary majority is aggrieved that the ageing dictator is refusing to concede real power. Gono’s legitimacy and competency is contestable.

According to the new power sharing agreement, all appointments are supposed to be frozen until there is cabinet consensus. However, Mugabe has maintained his character of intransigence by extending tenure of governors and ministers in an environment where even his own legitimacy as national president is disputed by MDC and some SADC countries.

However, while state media noted that Gono inherited weak currency, rampant inflation and a suspect banking system in 2003, they fail to highlight that during his five-year tenure, Gono presided over a total collapse in the monetary and fiscal systems. Analysts argue that doling out tractors, cars, cash loans to parastatals and paying for school examination invigilators is hardly a benchmark of success.

Zimbabwe has a worthless currency denominated in twenty zeroes, riding on world record one billion percent inflation. Gono prints a new denomination every month, while bank queues are getting longer by the day. A loaf of bread now costs one million five hundred thousand dollars, whereas account holders can only withdraw five hundred thousand dollars – not enough for one local bus trip to work.

American economist Steve Hanke, Professor of Applied Economics at The Johns Hopkins University in Baltimore and a Senior Fellow at the Cato Institute in Washington, D.C. has already proved that Gono is the epicentre of Zimbabwe’s financial system collapse. Hanke long proposed ‘Dollarisation’ – the use of exchangeable currencies as legal tender- in Zimbabwe as a solution, and Gono reluctantly adopted the strategy after protests by Zimbabwe National Chamber of Commerce two months ago. This has brought short-term respite to shoppers who were confronted with empty shelves and had to make expensive trips to purchase groceries from neighbouring countries.

Zimbabwean economist John Robertson has evidence that Gono’s printing machine has multiplied money supply a trillion fold, making it almost impossible to recover the value of the Zimbabwe dollar without dismissing Gono from his position. Gono’s quasi-fiscal misdemeanours include buying maize, fertiliser and motor cars. Early this month, he astounded educationists by volunteering to pay invigilators who had refused to fulfill their duties due to the collapse of the educational system. After hitting the headlines by closing banks, bureau de changes and refusing to de-regulate foreign exchange policies, Gono has publicly supported the ruling party ZANUpf and appeared in that party’s high-level political meetings.

The future of Zimbabwe’s monetary and fiscal environment is bleak. Mugabe has set the Reserve Bank of Zimbabwe (RBZ) on a collision course with a new MDC Minister of Finance who will have to deal with a central bank governor directly under the control of an unpopular but powerful head of state.

Rejoice Ngwenya is Coordinator of Zimbabwe’s Coalition for Market and Liberal Solutions (COMALISO)and a columnist of