Finance, Economic Development and Investment Promotion Minister, Professor Mthuli Ncube, reaffirmed the Government’s commitment to a phased de-dollarisation programme, insisting that the re-introduction of a domestic currency is crucial for economic recovery.
Presenting the 2024 Mid-Term Budget Review in Harare recently, Mthuli declared that the de-dollarisation process is “well underway” and aimed at creating a “mono-currency regime” backed by a stable Zimbabwe Gold (ZiG).
“The phased de-dollarisation programme is well underway and seeks to re-establish a mono-currency regime, backed by a domestic currency that can spur domestic production and boost exports by making local products more competitive in international markets,” Mthuli said.
The introduction of the Zimbabwe Gold in April 2024 was hailed as a significant step towards stabilising the economy. However, the minister acknowledged that sustaining this stability requires a multifaceted approach.
“Sustaining the stability in the medium-to-long term, will require consistency in the implementation of policy reforms, effective management of liquidity injections into the market, as well as, foreign currency generation and supply to the economy,” he said.
Building public confidence in the new currency is central to the success of the de-dollarisation process.
“Furthermore, confidence building measures will be instituted and clearly communicated to the market, in order to upscale trust, acceptance and use of the domestic currency,” the minister added.
Recognising the challenges posed by imperfections in the financial sector, lingering economic scars and eroded public trust, the Government has pledged to adopt a pragmatic and market-oriented approach to currency stabilisation.
“The policy framework to support the domestic currency will encompass pragmatic and market-based approaches, in order to lock out negative perceptions and adverse expectations that have weakened policy effectiveness in the past,” Mthuli said.
To bolster credibility, the Government will maintain a sufficient supply of ZiG notes and coins while safeguarding the currency’s value.
“An optimum quantity of ZiG notes and coins will be maintained at all times in order to balance the need for transactional convenience with that of preserving the store of value properties of the local currency,” Mthuli said.
Beyond currency stabilisation, the Government outlined a broader macroeconomic strategy. This includes restructuring the national debt, tightening monetary policy and boosting domestic revenue collection.
“Restructuring of the national debt to reduce servicing costs and alignment to Budget capacity; Effectively managing liquidity injections into the market through the Liquidity Management Committee; Following up on measures to strengthen the demand and use of domestic currency by Government, the corporate world and the general public; Progressively switching the foreign and local currency mix in the economy, as part of the de-dollarisation strategy,” Mthuli said.
Fiscal discipline is also a key component of the plan.
“Fiscal consolidation measures, including domestic revenue mobilisation and asset disposal to ensure sustainable fiscal deficit financing and avoidance of the inflationary and self-defeating recourse to the central bank overdraft facility will be employed,” he added.
The minister reiterated the Government’s commitment to a market-based foreign exchange system and pledged to deepen financial markets.
“Continuous improvement in the functioning of the market based willing buyer willing seller foreign exchange market; and instituting measures to deepen money and capital markets activities, to foster use of longer-term financial instruments in the economy,” he said.
While the Government’s resolve to revive the domestic currency is clear, the road ahead is fraught with challenges. Critics argue that hyperinflationary experiences have eroded public trust in the local currency, making the transition to a mono-currency system a daunting task.
While Mthuli is yet to unveil roadmap to de-dollarisation analysts say the success of the de-dollarisation programme will depend on the Government’s ability to implement consistent policies, restore confidence and address underlying economic challenges.
“On modalities to operationalise the ZiG currency as legal tender for use in the economy, a dedollarisation roadmap is now in place,” Information, Publicity and Broadcasting Services Minister Jenfan Muswere told reporters early this month during a post Cabinet briefing.
Source: Business Weekly
