Zimbabwe should de-dollarise otherwise its new currency the Zimbabwe Gold will go the way other currencies Zimbabwe has tried to introduce have gone, economist Eddie Cross says.
Writing on his personal blog, Cross argues that without its own currency, Zimbabwe cannot compete on the global market.
By using its own currency as the sole trading currency, he argues, Zimbabwe will bring the informal sector into line, curb illegal imports and price manipulation by dealers who produce nothing and employ nobody, but make substantial profits from simply trading currency.
Zimbabwe is currently using multiple currencies dominated by the United States dollar and the South African rand.
It is supposed to use these currencies until the end of 2030 but President Emmerson Mnangagwa has hinted that the country could phase out other currencies within the next two years.
Central bank governor John Mushayavanhu says Zimbabwe might not need to legislate the use of local currency but simply has to work on increasing the volume of trading in local currency to 50%. Once that is achieved, the local currency will work its way to the top. He says the 50% could be achieved by the end of 2026.
Mushayavanhu had targeted to increase the volume of transactions in local currency to 30% by the end of this year and on to 40% next year and 50% by the end of 2026.
He says the 30% has already been achieved.
Full blog:
The Role of the ZIG
When the ZIG was launched in April this year, just 4 months ago, the Governor of the Reserve Bank stated that he had 3 times cover for the currency in hard currency and gold reserves. He said he was determined to protect its value and was confident he could do so. They held the value at about 15 to 1 for two months but in the past month, the parallel market rate has devalued to 22 to 1. It bounces up and down but the trend is down. If this continues the ZIG is wounded and will not recover.
Why is this important? Firstly, the case for our own currency and demonetising the hard currencies currently in free use in Zimbabwe – the USD, UK Pound, Pula, Rand, Yuan and the Yen. Our own experience starts this process. When we adopted the multicurrency system in February 2009, it was in the context of the total collapse of our own currency, the Zimbabwe dollar, after it had served us well since we abandoned the Pound and left the Sterling Zone. We really had no choice but to go this route and it was Chinamasa who bit the bullet.
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