The use of the United States dollar by Zimbabwe has come under the spotlight following the downgrading of the US economy’s credit rating this week, a development that has raised panic on international markets.
The US loss of the highest AAA rating signifies that its economic power is gradually declining while on the other hand, China, America’s largest foreign creditor is becoming increasingly influential.
Economic analyst commentator Farai Dyirakumunda said the outlook of the United States was not that encouraging and it would help for the country to start exploring the use of other currencies.
He, however, said the current use of multiple currencies was likely to shield the country from the full impact of the fluctuating US dollar.
“The use of multiple currencies helps as it insulates us on the full ramifications caused by the decline in the currencies. It will make sense to look at the use of the South Africa Rand,” he said.
An economic analyst with a financial institution said the downgrading of US economy and the weakening greenback does not warrant changing a currency.
“A currency can only be substituted if it fails to perfom its core basic functions which include being a store and measure of value, among others. Despite the recent volatility, the US dollar is still a stable currency backed by a $14 trillion gross domestic product economy, inflation is relatively low and stable in the region of 3-4%,” said the analyst.
“Also remember the recent weakening of the US dollar is mainly being driven by the downgrade on the US debt ( due to the protracted debate between President Barack Obama and Congress over raising the country’s borrowing limit), resulting in investors opting for the yen and Swiss franc as safe haven currencies.”
The analyst said joining the Rand Monetary Union had its own advantages and disadvantages adding that: “Going back to the Zimbabwe dollar is not an option under the current political regime.”
Reserve Bank of Zimbabwe governor Gideon Gono told executives at a recent meeting that printing money like what the US was doing was improper saying budget deficits were not healthy for an economy as they could lead to currency difficulties.
Said Gono: “If that (extensive printing of money) doesn’t weaken a currency, I don’t know what will. Extensive printing of money — get it from me, I have got experience in that, so if there is something that I can teach the world as free advice to the US and those countries that are relying on the printing press is — Don’t do it!”
“So please, my brother from the US embassy, take that message to the Treasury secretary and say some little bugger there who has a lot of experience says he loses sleep when he sees you printing, printing against a background he has attached his economic fortunes to you.
Hence, we are saying you are no longer on your own to an extent that we have tied our economic fortunes to you. Please, just behave. Don’t behave in the manner in which I was behaving.”
Economist Tony Hawkins said: “It will not be good to change currencies to a new currencies as we have been using the multiple currency for less than three years.”
He said given that the country’s economy was liberalised it will feel the impact of challenges affecting the global economy just like all the other currencies adding that the country would continue to feel the impact of fluctuations between the US dollar and the South African rand as the latter was the country’s main trading partner.
“There are no stable currencies at the moment, it’s a global problem, we just have to see it through,” said Hawkins.