Zimbabwe’s Currency Crisis: Eddie Cross Warns of Imminent Collapse

Eddie Cross, an economist and adviser to President Mnangagwa, has raised serious concerns about Zimbabwe’s current monetary policies. He believes that the direction the government is taking will lead to the inevitable demise of the Zimbabwean currency (ZiG).

Cross issued his stark warning directly to the Reserve Bank of Zimbabwe (RBZ) governor, John Mushayavanhu, in what can only be described as a passionate plea to reconsider current strategies.

At the core of Cross’s argument is the belief that what the RBZ is doing—primarily issuing ZiG-denominated treasury bills and failing to back the currency with true reserves—is simply unsustainable.

According to Cross, the issuance of these treasury bills at artificially low-interest rates is fundamentally damaging the value of the currency, and the continuous devaluation of these financial instruments could very well spell disaster.

One of the primary points Cross raises is the lack of economic rationality behind paying exporters in ZiG for 25% of their earnings. With Zimbabwe’s export sector contributing about $1 billion monthly, exporters have no choice but to accept the local currency for a significant portion of their proceeds.

Cross underscores the absurdity of this practice, emphasizing that the government’s actions have led to an 84% devaluation of treasury bills, essentially wiping out $14 billion worth of value from exporters’ earnings.

It’s not just exporters who suffer. Cross points to the broader impact this policy has on the economy as a whole, noting how civil servants are also being paid in ZiG, a currency that rapidly loses value. This is happening while the government contradicts its own declared policy of dedollarization.

The pattern of printing more ZiG to meet various obligations, including civil servant allowances, directly undermines the economy, Cross argues. And it’s here that the heart of the problem lies: the RBZ’s refusal to learn from past mistakes.

Cross is clear in his recollection of Zimbabwe’s monetary history, particularly during the hyperinflation era, where the infamous 100 trillion-dollar notes became worthless overnight. He draws parallels to today’s situation, warning that if the government doesn’t halt its current trajectory, the ZiG could share the same fate as the failed RTGS dollars of years past.

What’s most striking about Cross’s critique is the call for genuine economic reform. He’s not merely criticizing for the sake of it—he offers concrete solutions. According to Cross, the key to stabilizing the ZiG lies in making the currency freely convertible.

Without convertibility, a currency has no real value, a point Cross emphasizes repeatedly. The test of any currency, he asserts, is its ability to be exchanged for something of real value. Fail this test, and the currency dies.

Cross advocates for a return to the basics: allowing exporters to liquidate foreign earnings on the interbank market, without artificial constraints, so the true market value of the ZiG can be established. This, he believes, is the only way to restore confidence in the local currency.

He even goes further, suggesting that Zimbabwe could benefit from bolstering its national reserves with gold rather than relying on the increasingly shaky foundation of paper currency.

Another significant aspect of Cross’s perspective is his critique of government’s use of foreign exchange. He draws on the past, recalling former RBZ governor Gideon Gono’s notorious policy of handing out luxury items while the economy collapsed.

Today, Cross points to the Secretary for Finance, whom he describes as occupying a similar position of unchecked power. The government’s access to undervalued hard currency, while benefiting the elite, does nothing to strengthen the broader economy. It’s a cycle that Cross fears could push Zimbabwe further down a path of economic ruin.

Despite the bleak outlook Cross presents, there is a glimmer of hope embedded in his suggestions. If the government were to heed his advice, allowing market-driven exchange rates and investing in solid assets like gold, there could be a path forward.

But for that to happen, there would need to be a complete reversal of the current policies that prioritize short-term gains at the expense of long-term economic health.

Cross’s message is blunt: Zimbabwe cannot afford to continue down this path. The ZiG, as it stands, is headed toward disaster unless radical changes are made.

His insight, shaped by years of experience both within and outside of government circles, is a wake-up call to those in power. The stakes couldn’t be higher, and the time for decisive action is running out.

The future of the ZiG is uncertain. But one thing is clear: without immediate intervention, the currency is on the brink of collapse, taking with it the economic stability that the country so desperately needs.

The Zim Bulletin