Economists differ on rand adoption, reintroduction of Zim dollar

ECONOMISTS yesterday expressed divergent views over adoption of the South African rand and re-introduction of the local currency, with top government economic analyst Ashok Chakravarti telling MPs that Zimbabwe needs to either adopt the rand or re-introduce the Zimbabwean dollar to solve the foreign currency and cash crisis.


But, another economic and trade analyst, Gift Mugano, differed saying, while it was difficult to run the economy in United States dollars, it was impossible to adopt the South African rand in an informal arrangement, as Zimbabwe would need to discuss the issue with South Africa first, and would end up enriching South Africa’s foreign currency reserves, as they would order the rands in US dollars, while South Africa just prints the rands for Zimbabwe.

Chakravarti’s argument, during his presentation to legislators at a post-budget seminar for MPs at a Harare hotel, were that dollarisation had not succeeded in any country in the world on a long-term basis, and was unsustainable.

“We cannot have a new economic order sustained by someone else’s currency, and so we need our own currency, and there are two solutions to it of which one is to adopt the currency of our main trading partner, which in our case is South Africa, and adopt the rand informally in the same way we adopted the US dollar in 2009,” he said.

“The second solution is to have our own currency, and the question will be how do we maintain the value of the Zimbabwean dollar? My proposal is that we release a Diaspora bond of $1 billion, which can back the new Zimbabwean currency,” he said.

Chakravarti said in order to ensure that people have confidence in the Zimbabwean currency, so that it is not misused by the government through issuance of Treasury Bills, the solution will be to take out the Diaspora bond of $1 billion and hire an international bank outside the country to hold on to it for Zimbabwe in real money.

But Mugano said it was impossible to adopt the rand informally, as it is not reserve currency, like the United States dollar.

“We cannot introduce our own currency. The proposals by Chakravarti are very sound from a mathematical point of view, but it is the same mathematical equation done by the Reserve Bank of Zimbabwe, which brought in $200 million bond notes which they said were equivalent to US dollars, but it all went in tatters. If we bring the Zimbabwean dollar, it will crash overnight like the bond note.”

Mugano said the best solution was to increase exports and stimulate production.

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  1. I would have thought that the bond notes together with their Afrexim bond of $200 million and the total disaster they have proved to be were clear evidence even to the most basic simpleton that introduction of a local currency at this stage is a non starter. Only a person who would not have applied their mind would suggest such a clearly idiotic solution.

    1. Introduction of the zim dollar is premature and cannot be a solution at the moment. Wats more important at the moment is to increase the productive sectors and the entire value chain

  2. Sekuru Chaminuka

    Comment…@gamatox, what is the solution as you potray yourself as a genius. Please give us the solutions and Zimbabwe will be and running.

  3. Comment…The bottom line is we dont

    have qualified RBZ Managers to make us cross to Canaan.Lets revamp our industries first thus agriculture and mining then we done.Otherwise we just chasing our shadows.

  4. The Other Economist

    Comment…what Mugano speaks of increasing our exports is a medium term solution.Chakravarti is probably suggesting a short term solution.

  5. Adopt rand informally that’s the only solution here

  6. Eagle's eye & baboon's ears

    How do we adopt the Rand informally when it is not a reserve currency , sounds like you are economically dwaft. Consult or read wider before making comments.
    the solution is to have all foreign currency which was externalized returned back, all Zanu pf members and unscrupulous business people forensically audited you will see money back in the banks.

  7. Why are you afraid to enrich south Africa by printing the rand?
    Where is the USA going to get the usd apart from printing.

  8. What is need in this country is to revamp our industries, increase productivity thereby increasing exports. We are importing too much and exporting far much less. We are wasting the little forex we have importing items like matches, diapers,food stuffs, bricks etc which we can actually produce locally. Lets be innovative industrially and stop thinking of importing everything. Lets be productive in our industries.

  9. Economist or no Economist we are heading for a crush.

  10. Get Mugabe and all his pals into Chikurubi immeadiatly and let them out only when they have returned the billions, especially the 15billion from the diamonds. Until then we will remain f….ed.

  11. @sekuru chaminuka zvataurwa ndezvekuti hatina choice but kutoshandisa rand full stop.varikuti increase in production mariii yacho ichibva kupi?zim dollar harikooo it does not exist.educated failures is most zimbabweans.zanu haiinde kuenda chaiko zanu must be banned forever n ever

  12. Richard Deschain

    We need to make sound economic reforms before we even entertain the idea of introducing our own currency. Democratic reforms are also imperative as they give investor confidence, which this country critically needs. Our problems run much deeper that what currency we need to use.

  13. We just have to export our own manufactured products, full stop. Those companies which were producing were taken over by some politicians who had no knowledge whatsoever of the goings on resulting in the companies folding down. Talk of foolish greedy people. Until we see smoke coming out in the industrial areas, forget it.

  14. We need to first identify those critical industries that were closed down and put them back on track thus we improve on production and increase our exports. We also need to see how much we recoup after the expiry of the amnesty of 31 Jan for looters and those who externalized

  15. We need to export more goods .Reserve Bank is not serious on ASSET BASE ACCOUNT ,OR SIMPLY THEY DONT HAVE AN IDEA .Our imported electricity is running industry with very old capital.Fuel imports is for luxuries like driving into down daily wth no output from it.Reserve Bank must take serious interest in stimulating production for exports.As for currency ,its rather better to revert to US$ for now while working on export production goods.The bond is not helping at all.The Zimdollar will not help,the rand will not umless SA is willing to give a grant of 100 billion rand .The bond took away all the little hard currency that was available on the market.It seems Reserve Bank is using the bond just to mop out all hard currencies from the market for the import of non optimal goods like fuel,electricity and some external payments.YOU CANNOT GROW THE ECONOMY THIS WAY. ASK VIOLA GWENA.

  16. Lets we just adopt the rand fo South Africa is our main trading partner for if we use the rand there will be nothing like price hikes and secondly the Statutoury instrument SI 64 shoul be repealed and let goods flood the market and this will reduce inflation

    1. I agree with that. Once we adopt the rand, we will have dealt with quite a multifacted problem. More than 50% workforce in SA are Zimbabweans, most goods that the shops here are selling are from South Africa and their prices are competitive. There will be price stability, no need for Zim Diaspora in SA to send goods but will send money. Our goods will be marketable in the region because they will be pegged in rands and this in turn will increase exports and increase productivity, bring more foreign currency to procure machines to expand factories and increase more production. This will in turn create more jobs

  17. Lets we just adopt the rand fo South Africa is our main trading partner for if we use the rand there will be nothing like price hikes and secondly the Statutoury instrument SI 64 shoul be repealed and let goods flood the market and this will reduce inflation

  18. What Chikaravarti is saying is more logical and economically sound . We can use the US dollar as an anchor currency .This can be achieved by having lets say US$1 Billion dollars as foreign currency reserve and then we print our local currency with Mugabe’s face and peg it against the US$ ie US$1 : Z$10 that will translate to Z$10 Billion and wen our reserves increase we will also increase the amount of Z$ dollars. This is known as the currency board system. It worked well in Hong Kong , Singapore , Estonia and Agentina. Last but not list the reserve currency need to be away from zanu pf sticking hands . It can be kept in a foreign bank. People should exchange the local currency with the US$ whenever they want. The problem with bond notes the are not backed by any reserves , so u cannot exchange bond notes and US$ and hence the outcry

  19. we can do everything else but as long as our industry is at lower than 20% capacity and exporting so little, we will continue talking. Just like the challenges with over valuation of the USD and the failure of the bond note, any other currency may still struggle with our low productivity. During the GNU, the dollar was working well, there was confidence with the economy and more importantly Biti came up with DIMAF for distressed key companies which jumped production to 50% levels and when it later on after that went down to current levels

  20. why monetize our economic problem. zim has a real problem, let put our factors of production to work.

  21. why monetize our economic problem. zim has a real problem, let put our factors of production to work.

  22. We have used the rand before zvichishanda dai pasina vanhu vekuHarare vakachemera us dollar ..Matabeleland yese yaishandisa marands 2009 kusvika 2014…Saka chashamisa pakushandisa marands chii.. 3/4s of our workforce is earning rands in South Africans…To hell with reserve currency mantra..Ringori jargon remaeconomists but kutaura chokwadi…Rand is the way to go…Takapusa isusu vanhu.
    makombi nemasupermarkert ingotangai kupricer zvinhu nemarands muone ,,just ignore this retarted government.Patakambotanga kutora marands nemadollar in 2008 handiti government yairamba,vanhu vakangoi gnowa…mazidhara ayo haana zvaanoziva kunze kwekungonyepa.

  23. increasing production and promotion of exports i agree but My question is in what currency is our cost of production and in what currency are we going to sale our exports if its US Dollar then that will be in vain because both cost and exports are expensive for both foreign and local investors. The same way we did in promoting the dominants of US over the basket of multi-currency we should do the same such that it becomes cheaper for investors in both cost of production and exports.Start with agricultural products sale them in any other currencies which is not US. If the country continue with this strong currency definitely nothing is going to materialize

  24. Ndex ka Manemba

    Comment…using the rand makes sense…..more than 3 million Zimbabweans work in SA. so cash flow will improve since Zimbos at this time only “export” labour.

  25. South African rand is the only panacea to oour current economic problem.

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