HARARE – Industrialist Busisa Moyo has re-ignited the rand adoption debate by saying Zimbabwe can encourage “the wider circulation of the South African currency under its multi-currency system”.
This also comes as the country’s liquidity crisis has worsened and economist-cum-banker Persistence Gwanyanya says the rand would help to stabilise prices, and reduce money supply in the economy.
“There is a difference between… joining the Rand Common Market Area (formerly the Rand Monetary Union) and using the rand as the only currency, while the American dollar is foreign currency,” Moyo said.
The Bulawayo-based executive and economists’ views — to adopt the South African rand as an anchor currency — come as Zimbabwe has been battling to address the current economic crisis, while building reserves for the introduction of a local currency within the next three years.
As it is, the southern African country has been experiencing acute foreign currency shortages caused by a huge trade deficit, high government expenditure and illicit financial outflows, among other things.
While government in recent policy pronouncements is trying to control the situation, experts believe government is doing more harm than good, as the currency crisis continues to worsen.
But Sifelani Jabangwe, the Confederation of Zimbabwe Industries (CZI) president, said the rand issue requires a lot of engagements between government and private sector.
“This is to try and stabilise the economy. We have to assess all possible angles and open a robust debate,” he said.
Zimbabwe also witnessed a 15,4 percentage point inflation jump to 20,85 percent last month as Treasury slashed 2018 growth projections to 3,1 percent from an initial four percent forecast.
Tony Hawkins, an economics professor, is of the view that the country was going through re-dollarisation, highlighting it needed at least 10 years to stabilise.
His sentiments are supported by Gwanyanya who also voiced that the immediate adoption of the rand will help to stabilise prices in the country and improve investor confidence.
In the past few weeks, the country experienced supply bottlenecks of commodities such as cement, as well as isolated shortages of bread and fuel; with prices of some products resultantly going up by as much as 100 percent.
“The recent currency instability has increased the benefits of rand as anchor currency. Never mind that it’s already in the basket of multiple currencies, the immediate benefit of the rand is to reduce the excess real time gross settlement (RTGS) balances by 14 or so times to around $655 million as at 30 June 2019,” he said.
He also highlighted that the rand would make it easy to support the local currency with the United States dollar as a reserve currency.