Pro-dollarisation economist climbs tables celebrating multicurrency extension

Tinashe Murapata
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Economic commentator Tinashe Murapata believes that the extension of the multi-currency system in Zimbabwe was influenced by a combination of factors, including the interaction with the International Monetary Fund (IMF).

The IMF staff team led by Wojciech Maliszewski conducted a staff visit in Harare from October 18–25, 2023 conducted a visit to Zimbabwe to discuss economic developments and the outlook. They noted that there is still a significant difference in exchange rates and high inflation.

On 27 October 2023, the Zimbabwean government allowed for the settlement of transactions and payment for goods and services in foreign currency until 31 December 2030. President Emmerson Mnangagwa said Statutory Instrument 218 of 2023 overrides another regulation called Statutory Instrument 142 of 2019 which declared the Zimbabwe Dollar as the sole legal tender in any transaction in Zimbabwe.

Economic commentator, Tinashe Murapata, believes that the decision to extend the multi-currency system was influenced by a combination of factors, including the interaction with the IMF. He said the IMF warned Zimbabwe about the risks of having a mono-currency system without reserves and confidence in the financial system. He said:

The IMF was here, on a staff visit straight after the IMF Annual meeting in Marrakech. The IMF team had some strong words for Zimbabwe. The public statement betrays sterner engagement behind closed doors. The message would have been the same; it would be suicide to venture into mono currency when the country has zero reserves and low confidence in its financial system.

The second event that might have swayed the authorities is the fast-depleting levels of USD cash in the formal system. Contrary to popular belief that the banks stopping their lending activities moved the needle, it’s the shortage of cash that roused panic. As of July USD cash was US$350m from the highs of US$550m at the beginning of the year. After the elections, this number has continued dwindling as depositors became worried about the rhetoric coming from a very powerful President. Notwithstanding, the international commodity price slump that has our miners worried and buckling. The major depositors in our financial system are foreign companies.

He added that geopolitical tensions and concerns about capital safety have likely played a significant role in Zimbabwe’s economic situation. Murapata said international creditors are worried about the safety of their money and repayments, and credit committees have increased monitoring and oversight in high-risk countries. South African investors, who control a significant amount of capital in Zimbabwe, have concerns about doing business in the country and the stability of the currency. The Zimbabwean government is not easily swayed by domestic actors and often disregards local business advice. Despite this, Zimbabweans themselves hold a significant amount of money and make investments and contributions to the economy.

Murapata also said the extension of the multi-currency system in Zimbabwe has brought relief to the public, but there are still concerns about the lack of a proper operating model. He said the credibility of the Reserve Bank of Zimbabwe (RBZ) is questioned, and there is a lack of trust and confidence in the system. The Nostro payments system is seen as the key to the success of the multi-currency regime, but it needs to be protected and managed properly in order to gain market confidence. He said the political situation in Zimbabwe is also a factor, with divisions and succession issues taking focus over economic concerns.

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