Reserve Bank of Zimbabwe governor Dr John Mangudya has likened the southern African country's ongoing economic woes – including running inflation and a currency in free fall – to a demon that can't be touched, but can be felt.
On 1 January 2019, the Zimbabwe dollar was pegged at 1:1 with the US dollar, but after it was floated in February, it tumbled and had to be pegged again at 1:25 in March this year. It is now worth 1.6% of the United States dollar.
John Roberts blames this on unrestrained money supply growth combined with government spending outside the national budget.
On the parallel market, used by many in the informal economy, the exchange rate has fallen to 1:60 against the greenback.
Mangudya, for his part, does not blame the currency tumble on the central bank's "perceived" strong appetite for money printing. Instead, he has attributed it to an economic demon he likened to the outbreak of the coronavirus.
The origins need to be traced, he added.
Addressing the Budget and Finance Parliamentary Committee on Wednesday this week, Mangudya said: "There is a demon in our economy which needs to be traced. It's more like an economic virus, which you can’t touch but you can feel it," he said.
Zimbabwe's inflation, which Mangudya told Parliamentarians is tied to the exchange rate movement, stood at 676% in March – a ten-year high.
Mangudya did not address rising prices, an ongoing challenge for Zimbabweans, many of whom face low disposable incomes and increasing poverty levels.
"We are so convinced that there is a demon in our economy. We are defying logic," he said.
"There is asymmetric economic warfare that is going on… which is more like a virus which we cannot see. We are all wearing masks, we are all afraid of it – no one knows what it is – [and] so is our economy."
The challenge goes beyond money supply, he added, in response to critics of the central bank's response.
The Zimbabwe dollar’s rapid devaluation could be attributed to non-monetary factors such as speculation, indiscipline, perception and manipulation, he said.
He also attributed the situation to the country’s biggest mobile money service platforms, which, as of 8 May 2020, accounted for 88.33% of national transaction volumes.
The mobile banking platforms are now being used as an industry by foreign currency dealers, where they trade foreign currency in a "Ponzi-like" market, he said.
"They are making money out of selling money," by selling at a higher rate than it was purchased, Mangudya argued.
He said the central bank, which two weeks ago froze some of the mobile money accounts, wanted to "exorcise the demons" on that platform, which according to Mangudya is now more like "Sodom and Gomorrah".
The central bank will apply "chemotherapy" on the "cancerous activities" eroding livelihoods of Zimbabweans, he vowed.