ZIMBABWE’S economic woes will persist until there is serious dialogue among key domestic players in politics and the international community, renowned banker Nigel Chanakira has said.
Chanakira, who is the current Zimbabwe Economic Society president, said the country’s economic manoeuvres will yield no meaningful results in the absence of political dialogue.
He said political will would also be important to bring back confidence to the country as an investment destination.
Chanakira was speaking during last week’s edition of the Big Debate Series, which focussed on Zimbabwe’s 2021 economic prospects.
The event is hosted by Alpha Media Holdings (AMH).
“You cannot defy the cycle of markets,” he said.
“What are the expectations that people have? It’s a function of confidence regarding your own currency. If you look at the conduct of monetary policy, an economy needs its own money.”
“There is local production. So, to then carry the currency of a foreign nation to institute domestic trade is not rational. But we have a history of hyperinflation, where we destroyed the confidence in the local currency and that depicts the extent to which you can rely on a domestic currency for trading purposes, investments and pensions,” Chanakira said.
Since last year, there has been clear market pressure for Zimbabwe to switch to the foreign currency system following the extensive depreciation of the domestic currency against foreign currencies.
The country had abandoned the Zimbabwean dollar in 2009 after the domestic currency had been decimated by hyperinflation, which was estimated at 500 billion percent by the International Monetary Fund at the end of 2008.
However, in 2019, moves towards a return to the domestic currency as the sole medium of exchange on the domestic market started before volatilities pushed authorities to pursue a multi-currency system again.
The top banker also said Zimbabwe must end international isolation.
“I know it’s not a popular thing but the re-engagement process is imperative,” he added.
Chanakira said developments on the policy front and implementation had been affected by lack of political will to institute key political and economic reforms.
He said Finance minister Mthuli Ncube’s academic and professional background spoke to his ability to deal with Zimbabwe’s economic crisis.
However, lack of political will remained a stumbling block.
“He had the suavity to be able to communicate in those international circles. But what is lacking is the political will.”
“I am inclined to agree with (former Finance Minister Tendai) Biti that engagement is imperative. For as long as there is no domestic and international dialogue, then I am going to keep the US dollars. That is just a rational economic expectation. I don’t expect the currency (local) to hold,” Chanakira said.
The banker said one cannot save the local Zimbabwe dollar because of the rate at which it depreciates.
He said the country should address the debt crisis to build confidence and unlock new funding.
“Go back to the drawing board from a politics point of view; and this goes for both parties. It takes two to tango,” Chanakira said.
Speaking during the debate, Biti said he expected 2021 to be more difficult for the economy than last year.
“The impact of Covid-19 is real. Covid puts a premium on an economy,” Biti said.
He warned that businesses were on the brink of collapse due to Covid-19 effects.
He also said corruption must be dealt with and the central bank must stop quasi-fiscal activities that have an effect of distorting the budget in terms of the deficit.
Currency constraints are causing problems for corporates.
However, speaking on growth prospects, AMH chief executive officer, Kenias Mafukidze said despite the relentless attack by Covid-19, 2021 remained an exciting year in many respects.
“There is a large expectation that the global economy will grow by 3%, ironically led by China, which will grow by 8%, accounting for 30% of this growth,” Mafukidze said.
He said the electric car will transform the globe from over-reliance on fossil fuels in the current year.