Fears that Zimbabwe dollar might be reintroduced earlier

A leading Zimbabwean economic analyst Tony Hawkins last week said the government might be forced to reintroduce the Zimbabwe dollar much earlier because of the tightening liquidity in the economy.

Finance Minister Patrick Chinamasa said the country will continue to use the multiple currencies adopted in 2009 – mainly the United States dollar and the South African rand- for the next five years.

But he has been battling to secure new funding from international financial institutions which take their cue from the United States which has refused to accept the results of the 31 July elections won by the Zimbabwe African national Union-Patriotic front

Washington has refused to lift sanctions on Zimbabwe. Though it has argued over the years that the sanctions are on targetted individuals, the Zimbabwe Democracy and Economic Recovery Act clearly states that international financial institutions like the World Bank, the International Monetary Fund and the African Development Bank, cannot issue loans to Zimbabwe unless this is approved by the United States president.

Zimbabwe is currently under a staff-managed programme which ends next month.
Hawkins said the tightening liquidity in the economy could force a rethink about the reintroduction of the Zimbabwe dollar especially if the government does not get new financing.
He said there was also the risk that politicians would seek attractive way out to finance campaign promises.

“I suspect – perhaps fear – that the government will opt for some dual currency option. Given the IMF forecast of a sluggish global economy and the third successive year of decline in non-fuel commodity prices, Zimbabwe can expect little in terms of an external stimulus to growth,” he was quoted by NewZimbabwe.Com as saying.

“This means growth must be domestically-driven in an economy where the government budget is under enormous pressure and there is no scope for a fiscal stimulus.”

The Zimbabwe dollar was trashed in 2008 largely because of printing money by the central bank but the situation was worsened by speculators who ended up issuing cheques for amounts that the Reserve Bank of Zimbabwe did not have.

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