Wednesday 7 December 2016

Mugabe facing political and economic chaos following new efforts to solve cash shortage

Ed Cropley in Harare

Published 26/11/2016 | 02:30

Robert Mugabe
Robert Mugabe

In Zimbabwe, where worthless $100 trillion notes serve as reminders of the perils of hyperinflation, president Robert Mugabe is printing a new currency that jeopardises the economy and his own long grip on power.

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Six months ago, the 92-year-old announced plans to address chronic cash shortages by supplementing the dwindling US dollars in circulation over the past seven years with 'bond notes'.

According to the Reserve Bank of Zimbabwe (RBZ), the bond notes will be officially interchangeable 1:1 with the US dollar and should ease the cash crunch.

After a 2008 inflationary meltdown caused by rampant money-printing, Zimbabweans are sceptical.

Internal intelligence briefings seen by Reuters raise the possibility that the bond notes, if they crash, could spell the end of Mr Mugabe's 36 years in charge.

A Central Intelligence Organisation (CIO) report revealed the army was also unhappy with the new notes.

"Top security officers have told Mr Mugabe not to blame them if Rome starts to burn," the report said.

Reuters was unable to determine the author of the report or if Mr Mugabe had seen it.

"Mr Mugabe was told the bond notes will cause his downfall," the report said.

The notes' first test will come in the informal foreign exchange markets on the streets of Harare.

If they fall heavily in value, they are likely to unleash an inflationary spiral that could bleed the banking system of its last few dollars and wipe out Zimbabweans' savings for the second time in less than a decade, economists say.

In interviews, none of eight money-changers trading South African rand and US dollars said they would accept bond notes at their $1 face value because of fears of immediate depreciation. The rand and the US dollar have become Zimbabwe's currencies since the local dollar was scrapped in 2009.

After the bond notes' announcement, #ThisFlag and #Tajamuka, social media campaigns targeting the new system, drew the biggest anti-Mugabe protests in a decade.

With unemployment at 90pc and a government budget crunch that has seen delays in payment of state wages, the discontent is seeping into the army.

The Sept. 29 CIO report said soldiers had applauded the social media protests because they led to an improvement in rations.

In July, veterans of the 1964-1979 liberation war that brought Mr Mugabe to power broke ranks, accusing him of "dictatorial tendencies" and blaming him for the "plight" of the economy and discord in the ruling ZANU-PF party.

The veterans enjoy warm ties with the army and security services, and want Vice-President Emmerson Mnangagwa, a former security chief nicknamed "The Crocodile", to take over. On the other side is a faction attached to Mr Mugabe's wife, Grace (51).

Mr Mugabe responded to growing pressure on Nov. 19.

"If I am making mistakes, you should tell me. I will go," he said. "Change should come in a proper way. If I have to retire, let me retire properly."

Irish Independent

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