Zimbabwe has to urgently adopt the South African rand as a currency to boost exports amid growing United States dollar shortages in the economy, a senior economist has said.
BY TATIRA ZWINOIRA
Scholar and senior economist Ashok Chakravarti told NewsDay in an interview on Tuesday that the current levels of real cash in circulation against deposits were alarmingly low at about $300 million, necessitating the introduction of the rand to ease cash pressures.
“A weaker currency is a benefit to trading and particularly for a small country for us to become competitive we cannot have a strong currency. We need a weak currency. You cannot have a dollarised economy in a non-dollarised world. Even if you build a wall around Zimbabwe, it (the US dollar) will always go out somehow as we will continue to be the source of US dollars for the rest of the region,” Chakravarti said.
“The option of the national currency was ruled out due to a return of hyper-inflation and it has been agreed that bond notes not not the solution to the problem. Now, in economics we have something called optimum currency theory which is very well-known and that is the basis on which the European Union was formed. So it says if you have countries that are very close to each other in trading them then you can have a common currency between.”
Zimbabwe enjoys between 50 and 60% of trading with South Africa.
Zimbabwe adopted a basket of currencies in 2009 to stem hyper-inflation. The currency basket has nine units dominated by the dollar.
South African ambassador to Zimbabwe Mphakama Mbete said it would be acceptable if the adoption of the rand helps stabilise trade between South Africa and Zimbabwe.
“I am not a financial expert, but being an important neighbour we would come to any agreement or discussion where there would be a win-win situation where both countries would benefit. So any arrangement around our currency where we would both win is fine for us. This is not relationship of exploitation,” he said.
Dollarised countries such as Ecuador and Panama are able to remain competitive in terms of trade due to them having access to the American financial system unlike Zimbabwe, which is under sanctions.