Central Bank says Zimbabwe has no capacity for full dollarisation

Dr. John Mangudya

HARARE – The Governor of the Reserve Bank of Zimbabwe (RBZ), Dr John Panonetsa Mangudya has said the southern African country has no capacity to fully dollarise.

His remarks come amid increased calls to redollarise as a way of addressing current economic challenges manifesting through a run-away parallel market exchange rate, inflation, and a depressed local currency.

Appearing before the Parliamentary Portfolio Committee on Budget and Finance, the apex bank’s chief said recent monetary and fiscal pronouncements were part of Government efforts to cure the economic ills. New Ziana quotes him as saying:

We do feel the pain of this economy and because we feel the pain of this economy that is why we are doing all we think is necessary for this economy to recover.

This economy has no capacity to fully dollarise. The preference might be there, which is emotional. I feel the emotion but the capacity to re-dollarise this economy is not there.

Zimbabwe will become a supermarket economy (if the country re-dollarises). We have been there before and that journey is a painful journey which as a governor of the Central Bank I will not propose to the August House. It is an easy way out, but the wrong way out.

Last week, the Government legislated the continued use of the US dollar alongside the local currency for the next five years to entrench confidence in the market.

On top of that, the use of the inter-bank market exchange rate in all economic transactions will also be legislated as the Government seeks to rein in the parallel market bench-marking of prices.

The RBZ also hiked interest rates in a bid to discourage speculative borrowing from banks.

Mangudya said he believed Zimbabweans wanted their currency to succeed, and as such, the Government would do all it can to ensure it remains stable.

Some analysts fear that the scarcity of foreign currency will intensify especially considering that Zimbabwe is not exporting enough to get forex. – Pindula News