Zimbabwe urgently needs own currency

Zimbabwe urgently needs own currency
Published: 17 February 2019 (230 Views)
THE drive for Zimbabwe to have its own currency is understandably gain-ing traction, particularly given the aberrations of price increases, multi-tier pricing and foreign currency shortages on the local market.

The country demonetised its local unit in 2009 after an unhealthy bout of hyperinflation, which was largely driven by illegal sanctions imposed on Zimbabwe by the United States and the European Union (EU).

It might be important to note that ZANU-PF - at its 17th National Annual Peoples Conference held between December 11 to December 16 in Esigodini, Matabeleland South province resolved that "Government intervenes expeditiously to eradicate the three-tier pricing distortions in the market".

The ruling party also pushed for Government to decisively deal with economic malpractices. Essentially, the resolutions stemmed from a Central Committee report, which noted that "the contentious issue that must be resolved centres on the exchange rate disparities, between and among, bond notes, RTGS (Real Time Gross Settlement) and the us dollar".

Most importantly, the report also observed that "without resolving these disparities, arbitrage opportunities remain abound, not just in fuel alone, but across all goods and services".

Finance and Economic Development Minister Prof Mthuli Ncube has since indicated that the introduction of a new currency will be done within the next 12 months.

Treasury believes that the introduction of a new currency will help give locally produced goods a competitive edge, while also removing price distortions in the economy.

According to the Treasury chief, the value of the mooted currency, which will only be introduced when the right triggers are in place, is something that we would have to protect once it is introduced.

Basically, the right triggers that Government is referring to include the reduction of the fiscal and current account deficits through improved fiscal discipline, cutting Government expenditure and improving tax collection. Happily, Government has a game plan, which is already underway. As expected, where any progress is being made, headwinds are bound to follow.

There seems to be a concerted effort by some groups, particularly the opposition, to derail efforts meant to stabilise the economy.

In his article titled "We are building Zim, block by block" in Bulawayo24 on February 3 this year, Information, Publicity and Broadcasting Services Permanent Secretary Mr Nick Mangwana couldn't have put it any better when he said that one "does not sabotage an economy characterised by inertia or regression; one can only sabotage a progressing economy".

In one of my recent articles, I made four key observations that had to be part of the country's monetary policy going forward:

1. I suggested that the successor policy to Zim-Asset (2013-2018) had to have a 10-year tenure. I also counselled that its monitoring, evaluation and review should be conducted half-yearly, and not quarterly, as was the case for Zim-Asset.

2. I noted that during the 10-year period, the nation should target double-digit economic growth rates, and not the rather low and modest 6 per-cent growth rate that was envisioned in Zim-Asset.

3. Further, I also opined that the country should strive for an unemployment rate of 5 percent or below, including a single-digit annual inflation rate.

4. One of the cornerstones of any monetary policy, I suggested at the time, was to reintroduce a local currency.

At the time, I reasoned that it would be ideal to change the name of the new currency as a confidence buffer to protect the perceived value of the new Zimbabwe dollar. Some people are still haunted by the precipitous loss of value and subsequent crash of the previous local currency.

There are various options that can be explored in naming a currency: it might assume the name of a founding father, or, alternatively, the name of one of our precious minerals.

It is exactly what South Africa did when it named its unit after the mineral-rich Rand Reef. However, whatever name we might have settled for the new currency, its introduction doesn't have to be delayed, and its value can be easily secured by precious minerals such as gold, diamonds and platinum.

In my view, this is feasible consider-ing the current dynamics, where production, especially in minerals such as gold, platinum and chrome, is rising. I believe that the country is unwisely and unnecessarily constraining and restricting itself on the currency issue.

The country is blessed with bountiful minerals, which can be a bedrock for the country's envisaged currency. There are also fertile soils than can be worked to produce commodities for both food security and foreign currency generation.

Tourism is also a low-hanging fruit that can be leveraged on to create value for the economy. Most notably, the number of visitors to Zimbabwe soared to 4 million last year, compared to about 2,5 million a year earlier. But economists say the ideal macro-economic conditions that must precede the local currency include: three-months import cover, high capacity utilisation in the manufacturing sector, high employment levels, reasonable inflation levels, desirable annual economic growth rates and fiscal discipline to contain both budget and trade deficits.

After considering all these propositions, I still maintain my previous conviction that we need to come up with a name for the new currency. Gold reserves & natural resources Should it be deemed necessary to support the mooted currency with physical gold reserves in the Reserve Bank of Zimbabwe (RBz)'s vaults, the process of accumulating the bullion should begin forthwith.

The marked increase in production, which resulted in last year's gold haul topping 33 tonnes, is quite encouraging and makes this suggestion feasible.

The country plans to produce 40 tonnes of gold this year. Further, the proposition is even made more feasible by the recovery of the diamond sector, where output is forecast to double to more than 4-million carats.

Progress is even more notable in the platinum sector, where two major projects — the $4,2 billion Karo Platinum project and the $3 billion Darwendale venture — are expected to come on stream. We mustn't also ignore developments in the lithium, or "white petroleum", sector.

The discovery of potential oil and gas reserves in the Muzarabani Basin, Mashonaland Central province, is also a game-changer. What makes the prospect of achieving the much-needed macro-economic stability tenable is the telling recovery in agriculture, where tobacco production reached a record-breaking 255-mil-lion kilogrammes last year.

Experts in the sector say local farmers have the potential to produce more than 400-million kilogrammes of the cash crop. Discipline But authorities need to ensure strict discipline in the prudential management of fiscal policy in order to support any new currency.

The resort to the printing press should be discouraged by all means. As and when the new currency is rolled out, there is also need to ensure a soft landing for bond notes, includ-ing an orderly exit from the multi-currency system.

In addition, when the bond notes are subsequently withdrawn, the country might renegotiate for new facilities to, in part, guarantee the newly introduced local currency.

Government has to proceed with haste to introduce a new currency within the time period it has set for itself — hopefully before the expiry of the Transitional Stabilisation Pro-gramme (Tsp) in December 2020. That done and achieved, we will definitely be on our way to become an Upper Middle-Income economy by 2030.

Edmore Ndudzo is the first black treasurer of the City of Harare. He was the lead consultant in the compilation and crafting of the Public Finance Management Act of Zimbabwe, which was promulgated in 2009. He writes in his personal capacity.

- zimpapers


You May Like These Videos


There are no comments.

Latest stories

Mugabe Aeroplanes sold for $12.5 million

by Mandla Ndlovu | 20 March 2019 | 183 Views

Chamisa opens up on his visit to Manicaland

by Mandla Ndlovu | 20 March 2019 | 178 Views

NetOne outpaces competitors, active subscriber base balloons

by Ndou Paul | 20 March 2019 | 122 Views

South Africa send support to Cyclone Idai-hit Manicaland

by ZimLive | 20 March 2019 | 125 Views

How to choose the right powder welding machine

by Tech Reporter | 20 March 2019 | 83 Views

No one will die of hunger, Mnangagwa tells cyclone victims

by Staff reporter | 20 March 2019 | 100 Views

Mnangagwa off to affected areas

by Staff reporter | 20 March 2019 | 87 Views

Mohadi opens tobacco selling season

by Staff reporter | 20 March 2019 | 98 Views

This is not it Mr Mnangagwa!

by Editorial - Daily News | 20 March 2019 | 129 Views

Obert Mpofu to appear before Bulawayo court

by Staff reporter | 20 March 2019 | 100 Views

Mnangagwa, Chamisa cannot lead dialogue

by Staff reporter | 20 March 2019 | 93 Views

Uproar over illiterate councillor

by Staff reporter | 20 March 2019 | 89 Views

Kwekwe VID receiving bribes in exchange for drivers' licences

by Staff reporter | 20 March 2019 | 92 Views

Lupane school forced to close over goblins

by Staff reporter | 20 March 2019 | 86 Views

Mnangagwa plans to stop using army in demos

by Staff reporter | 20 March 2019 | 111 Views

Government sells NetOne and TelOne

by Mandla Ndlovu | 20 March 2019 | 146 Views

How Prophet Isaiah Sovi foretold Cyclone Idai

by Mandla Ndlovu | 20 March 2019 | 179 Views

'Joshua Nkomo made Mugabe the leader of ZANU in 1975'

by Mandla Ndlovu | 20 March 2019 | 149 Views

Water shortage to increase in Harare

by Mandla Ndlovu | 20 March 2019 | 115 Views

#Cyclone Idai: Mnangagwa on the ground

by Staff reporter | 20 March 2019 | 112 Views

Zesa gets new board

by Staff reporter | 20 March 2019 | 100 Views

Chamisa wants MPs to push for Department of Civil Protection reform

by Staff reporter | 20 March 2019 | 109 Views

Heavyweights vie for ZACC posts

by Staff reporter | 20 March 2019 | 87 Views

Leyland eyes Zimbabwe bus plant

by Staff reporter | 20 March 2019 | 109 Views

Potraz summons Liquid over tariff hike

by Staff reporter | 20 March 2019 | 89 Views

ZCTU bosses' freedom bid quashed

by Staff reporter | 20 March 2019 | 53 Views

Over 100 trucks transporting Zimbabwe wheat stuck in Mozambique

by Staff reporter | 20 March 2019 | 91 Views

Ex-Zanu-PF Senator sued over $368k power debt

by Staff reporter | 20 March 2019 | 105 Views

Bulilima West MP bemoans absence of referral hospital

by Staff reporter | 20 March 2019 | 91 Views

MP takes council to task over floods

by Staff reporter | 20 March 2019 | 83 Views

Men jailed 2 years for defacing Mnangagwa banner

by Staff reporter | 20 March 2019 | 91 Views

Man (21) kills brother (15) over food

by Staff reporter | 20 March 2019 | 93 Views

Headman leaves behind 35 children

by Staff reporter | 20 March 2019 | 103 Views

Mash Central MDC youth leader out on bail

by Staff reporter | 20 March 2019 | 49 Views