OPINION: The Zimbabwe Dollar Wont Gain Confidence

An opinionist The Independent has said the new Zimdollar won’t gain confidence because it’s not backed by sustainable production.

Penned the opinionist:

A currency like the Zimbabwean dollar (Zimdollar) is fiat. Its value is determined by the confidence people have in it as a token of wealth.

It seems government wants to introduce small notes for psychological reasons; to conjure up an impression that there is discipline in terms of printing money. It is a flawed hypothesis considering it is not the size of the denomination of notes that renders a fiat currency stable.

Stability is only derived from the trust people have in the currency. If economic policies and fundamentals are unsound, the new notes will be shunned. Small denominations of a currency that is not trusted cannot guarantee restoration of confidence. Deception and cosmetic changes do not add value to the currency.

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Zimdollar will remain untrusted unless the small denominations are buttressed by essential economic changes anchored on political inclusivity.

This comes at a time the central bank claims it will bring new coins and notes into circulation to ease the credit crunch.

More: Zimbabwe Independent