Movement for Democratic Change-Tsvangirai Shadow Minister of Finance Tapiwa Mashakada yesterday said Zimbabwe should adopt the South African Rand to get out of the current cash crisis that has gripped the country.
But he said it will not be easy because of the stringent conditions a country has to meet to be accepted into the Rand Monetary Union which currently includes Lesotho, Swaziland and Namibia.
In a motion be tabled in Parliament yesterday Mashakada said it made more sense to join the Rand Monetary Union because Zimbabwe imported 60 percent of its products from South African while exports were 35 percent.
“It would be easy if we were going to transact in the Rand as a legal tender but it means playing by the rules of the Rand Monetary Union which includes Lesotho, Swaziland, Namibia and other countries who are using the Rand,” he said.
“For us to join the Rand monetary area, we have to make sure that there is what we call macro-economic convergence. This means that our economic variables must be in the ball pack of the Rand Monetary Area and one example is the budget deficit.
“The Rand Monetary area would say the countries which are using the Rand must not incur a budget deficit of above 5% GDP. So, there we will not pass the mark because our budget deficit will be 30%, 35% of GDP. So, we need to engage with South Africa to make sure that we can be accommodated on the Rand Monetary area and be put on a programme that ensures that our macro-economic variables converge with those of the Rand Monetary area. We need negotiations with the South African Reserve Bank to take into effect.”
Mashakada said that the problem with the multi-currency system, which is currently operating in the country, was that consumers and exporters will use the strongest currency in that basket.
“This is why in 2009, when we introduced the multi-currency system, the usage of the United States dollar was 49% and that of the Rand was 49% but over time, the Rand has been dumped and its usage is below 5%. The market will choose the strongest currency in that basket. So, that is why I am saying if we were going to use the Rand per se, it might solve our liquidity or cash flow problems as a country,” he said.
Continued next page