Zimbabwe should never have completely dollarised its economy in 2009 as this has seen people struggling to accept their own local currency three years after its reintroduction, Reserve Bank of Zimbabwe (RBZ) Governor, Dr John Mangudya has said.
Speaking during a public lecturer at Manicaland State University of Applied Sciences last Friday, Dr Mangudya said the Zimdollar should have been given a chance to regain its value alongside other currencies, instead of completely sidelining it for close to a decade.
“In Zimbabwe, we made one fundamental mistake of throwing away our currency in 2009. We were supposed to keep it and allow it to limp alongside other currencies.
“We should not have locked it out through a Statutory Instrument, saying don’t come back again, don’t resurrect. That is where we made a mistake.
“At one time the metical was useless in Mozambique, but they never threw it away. In Russia and Zambia, the same happened and when their economies began to pick up, their currencies regained value, but here we put it six-feet under and therefore it is now very difficult for people to accept the local currency.
“The irony in Zimbabwe is that big companies were the first to call for the use of local currency because they know that will make them more competitive on the global market, but the ordinary men and women on the streets are clamouring for a re-dollarisation of the economy,” said Dr Mangudya.
He said the country’s multi-currency system would continue until people had confidence in the local currency.
“Countries that would have completely dollarised cannot just wake up with a mono-currency, otherwise their economies will collapse.
There is something called histolysis, meaning that people still want to hold on to the past. We need to introduce a mono-currency gradually. We tried it in 2019 on June 24 and inflation spiked to 87 percent.
“People need to have more trust and confidence in the local currency. We will continue having a partially dollarised economy. It should also be noted that there is no country without a parallel exchange rate. However, this should be manageable, between 10 and 20 percent of the actual rate” said Dr Mangudya.
He added: “For us to have stability, we should produce more and more so that we substitute imports.”
Turning to the global economy, Dr Mangudya said the Zimbabwean economy is not immune to what is affecting all the other countries worldwide.
“Inflation is going up in every country and Zimbabwe cannot go against the grain. The growth of this economy is related to drought or weather patterns.
“When there is drought, the economy goes down, when we receive good rains, the economy goes up. We expect people to grow more wheat this year so that the economy can continue to grow,” said Dr Mangudya.
He said the country was pursuing a tight Monetary Policy stance to restrict people from using money recklessly.
“Money is the root cause of all evil. Exchange rates are being manipulated because people have money. That is why the exchange rate rapidly moves from US$1:ZWL200 to US$1:ZWL300 and then to US$1:ZWL400 within a short space of time.
“Each day I try to figure where the money doing rounds on the parallel market is coming from and we now know what is happening. That is why we had to temporarily stop banks from lending money.
“We wanted to see the real culprits pouring money on the parallel market. We monitor the banks to ensure that they have the right systems.
‘‘Although the real people who put money on the parallel market are not easy to dictate as they use third parties to do so, our Financial Intelligence Unit is working day and night to flash out these culprits. Very soon we will expose all their activities and bring them to book.
“Our country has a lot of people with delinquent behaviour and I have been wondering where this is coming from and have concluded that our past experiences are now shaping people’s behaviour. But then we can’t continue living in the past. Let us move forward and build our economy,” said Dr Mangudya.
Speaking on the opening of the borders for the importation of basic commodities, Dr Mangudya said the move was put in place to ensure the availability of the basic commodities.
“Opening the borders ensures competition on the market. Local retailers were increasing prices willy-nilly and we decided to open the borders to ensure availability of the products and price stability. If we have more goods on the market, there will be prices stability,” he said. – Manica Post