Gono opens up on bond notes – more

FORMER Reserve Bank of Zimbabwe (RBZ) governor Gideon Gono has broken his silence on the recent decision by his successor John Mangudya to introduce bond notes into the economy.

Gideon Gono

Gideon Gono

Gono left his job at the expiry of a turbulent 10 year tenure in 2013, after presiding over record breaking inflation widely blamed on his quasi-fiscal operations as central bank chief.

During the period, Gono printed bearer cheques in a bid to contain a revolting economy which drove basic commodities off supermarket shelves and onto the black market.

The ex-governor has vehemently defended his decisions insisting he was merely taking instructions from his principal, President Robert Mugabe.

However, as debate continues to rage among Zimbabweans who have expressed strong resentment towards the return of their own currency, Gono’s silence has been conspicuous.

Following repeated attempts to solicit for his take on the bond notes controversy by NewZimbabwe.com, Gono poured his heart out, saying Mangudya was merely trying to tackle problems unique to his time.

Zimbabweans feel bond notes will bring back the turmoil that marred the former governor’s tenure.

“Generally, governors avoid dabbling into each other’s tenures, so I really can’t comment much except to pray for immediate and urgent solutions,” Gono said.

“The governor is receiving unfair attacks and brickbats from across the board and my hope is that he does not get discouraged.

“I do, as I think my predecessors also do, understand and support him even if we have not met to share ideas since he took office due to mutually busy diaries.

“No predecessor wants his successor to fail, and I’m no different. He (Mangudya) is operating in a different era from mine and no two periods are the same.”

The country’s opposition has thrashed the decision to introduce bond notes, saying this was an attempt by a cornered Mugabe-led regime to “rig the economy”.

Gono blamed the current uproar surrounding the pending introduction of bond notes to what he said was political disunity among Zimbabweans.

“The period 2000 to 2008 was characterised by unprecedented political animosity and conflict among Zimbabweans politically compared to anything ever seen in the 1990s,” Gono said.

“This lack of unity among Zimbabweans clearly adversely affected the economy and how the governor reacted to the ensuing challenges which probably a previous, current or future governor would not be confronted with.”

 

Gono added: “Political disunity in relation to economic issues reduces confidence in an economy and more so in one that desperately needs investment, jobs, production and stability.

“These and other unique factors during one’s given tenure make period comparisons academic.

“… I always hold Zimbabwe’s economy and the well-being of all its people very dear and close to my heart such that I hope and pray that the proposed measures (bond notes) work to avoid Zimbabwe sliding into another casino status number two; this time round, in USD terms.

“I think we need to delve deeper than we have done so far in finding and prescribing solutions to avoid curing symptoms only instead of the real causes of our current liquidity problems.

“Liquidity problems are fatal to any economy just like lack of adequate blood in our bodies leave vital organs of our bodies functionally dead.”

BELOW IS GONO’S RESPONSE IN FULL

1. No two governors or tenures, just like days, are the same. Each governor faces a different set of pressures or circumstances and it is these unique circumstantial settings in different time zones that influence each governor’s policy reaction. Trying to make a blanket comparison between any two or more governors and their tenures is not only wrong but unfair to any of them.

2. The 1956-64 governors of RBZ then were principally occupied with central bank set-up issues, federation challenges between Malawi and the two Rhodesias, Northern and Southern. Currency and monetary policy issues were principally the headache of Britain as colonial power.

3. The 1966-79 governors were principally war-time governors whose primary focus was on import substitution, sanctions busting, quasi-fiscal support to the minority regime beneficiaries through such institutions as Agricultural Finance Corporation (now Agribank). They got plenty of financial support from South Africa then and other western donors and governments when it came to currency measures, fiscal and monetary policies and funding.

4. Between 1981-2000, the focus was on a new independent, post-war state reconstruction, welfare provision expenditures and capital needs and programs with the support of the international community so to speak, until the day we embarked on our land reform program.

5. Even though we had droughts and other social expenditure challenges, this period cushioned the central bank or monetary authorities from too much pressure as significant and generous funding came through multi-lateral, bilateral and grant inflows from several donors.

6. My book, The Zimbabwe Casino Economy published in 2008, clearly traces these inflows and support for the period 1966-2007. The record shows that from 1966-1999, Zimbabwe registered capital account surpluses largely from the external sources and only started to experience problems from 2000 onwards. This became and still is, a sanctions era which many people still don’t understand fully and deny it. Nothing of the sort was the case between 1980-1999, making these years incomparable to 2000 and after.

7. For example, the IMF supported Zimbabwe with a total of $522million between 1980-1999 and World Bank $1,3 billion same time while the African Development Bank supported Zim to the tune of $525million same period. The three multi-lateral institutions gave zero financial support to Zimbabwe since 2000.

8. Bilateral creditors and the donor community which had been very active prior to 2000 also moved out or significantly reduced their support leaving the fiscal and ongoing development financing space terribly squeezed, hence their unprecedented and without-choice reliance on monetary space as the only source of sustenance.

9. With the disappearance of the traditional external sources of support, international goodwill vanished and the country’s traditional friends only paid lip-service to our challenges and against the ropes, our country was left and still is. Political, sovereign and financial risk perceptions increased at a time when the country’s debts accrued in the 1980/90s were now due for repayment, hence arrear pressures from multi and bilateral creditors for these loans. A significant amount of these loans were “taken over by Government and mis-classified as Gono’s quasi fiscal $1,3billion RBZ quasi-fiscal debts” but that’s a debate for another day). I am not delving into reasons here but simply demonstrating the differences in periods of governorships and reaction to those pressures would be different in the absence of traditional and bookish prescriptions of dealing with them.

11. Suffice to also point out that politics of the day do also play a significant role in determining the state of any country’s economic wellbeing or otherwise.

12. This was aptly recognized by H. E. the President, Cde R. G. Mugabe at one stage in 2007 when he said; “we have all been witnesses to the futility of trying to turn around our economy in an environment of pointless conflict”.

13. The period 2000 to 2008 was characterized by unprecedented political animosity and conflict among Zimbabweans politically compared to anything ever seen in the 1990s.

14. This lack of unity among Zimbabweans clearly adversely affected the economy and how the governor reacted to the ensuing challenges which probably a previous, current or future governor would not be confronted with.

15. Political disunity in relation to economic issues reduces confidence in an economy and more so in one that desperately needs investment, jobs, production and stability.

16. These and other unique factors during one’s given tenure make period comparisons academic.

17. As for the current move by Governor Dr Mangudya and Government to introduce bond notes is concerned, I can’t comment much because I do not know the set of circumstances that are influencing this move. I always hold Zimbabwe’s economy and the wellbeing of all its people very dear and close to my heart such that I hope and pray that the proposed measures work to avoid Zimbabwe sliding into another casino status number two, this time round, in USD terms. I think we need to delve deeper than we have done so far in finding and prescribing solutions to avoid curing symptoms only instead of the real causes of our current liquidity problems. Liquidity problems are fatal to any economy just like lack of adequate blood in our bodies leave vital organs of our bodies functionally dead.

18. Generally, Governors avoid dabbling into each other’s tenures so I really can’t comment much except to pray for immediate and urgent solutions.

19. The Governor is receiving unfair attacks and brickbats from across the board and my hope is that he does not get discouraged. I do, as I think my predecessors also do, understand and support him even if we have not met to share ideas since he took office due to mutually busy diaries.

20. No predecessor wants his successor to fail and I’m no different. He is operating in a different era from mine and no two periods are the same.

 

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Post published in: Business