According to Biti, it was a temporary measure, designed to keep the country going until it could introduce the South African rand, or some version of it.
“The SADC [Southern African Development Community] monetary union was supposed to be a reality in 2010. My exit strategy then was to adopt the regional currency, which to all intents and purposes would be a rand by another name. But in 2010, I realised that the regional currency was not coming. So I tried to make Zimbabwe join the rand monetary union, but I met resistance from Mr Mugabe and the bankers association,” said Biti.
SADC has been talking about implementing a regional currency for years. But that 2010 deadline came and passed, and Zimbabwe was stuck with the US dollar – and there’s no sign that the regional currency will become a reality any time soon.
But given the volume of trade between Zimbabwe and South Africa, Biti says it would have been wiser to promote the rand as Zimbabwe’s de facto principle currency.
“I still believe that Zimbabwe ought to join the rand monetary union,” said Biti.
Had Biti succeeded, Zimbabwe might not be facing the cash crunch it is now.
Morgan Tsvangirai, leader of the Movement for Democratic Change-T and prime minister in that Government of National Unity, says it is not too late to adopt the rand.
He dismisses the current government’s plan to introduce dollar-backed ‘bond notes’ as doomed to fail – a position shared by most economists – and said that turning to South Africa is now Zimbabwe’s only option.
“Because we don’t have economic ties with the United States, because our trade with the United States is negligible, it means that our dollarisation policy makes our economic policies here more expensive. The only thing that is there, that is feasible, is to have the rand as a legal tender. Ninety-five per cent of our trade is with the rand. Why avoid the inevitable, which is that Mugabe has to swallow our so-called sovereignty and say yes, I have to negotiate with South Africa,” said Tsvangirai in an interview.
So what would this look like in practice? Economist Russell Lamberti is the co-author of When Money Destroys Nations, a forensic account of how and why the Zimbabwean dollar collapsed.
He explains: “Zimbabwe has numerous options for currency reform. One would be to set up a currency board, which is a legislative requirement to back a “new Zim dollar” at a fixed parity to the US dollar or to the rand, or to a weighted FX basket, with no monetary policy discretion by the RBZ. Another option is to fully adopt the rand in negotiation with South Africa.
“In this case, Zimbabwe submits its entire monetary and financial system under the regulatory jurisdiction of the SARB and Zim banks become subject to the SA repo system. Alternatively, Zimbabwe could have a laissez-faire monetary system in which there are no legal tender laws and no state currency.”
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