Introduction of the local currency was a wrong move: Mugano

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BY TAFADZWA MHLANGA

RENOWNED economist and financial analyst Gift Mugano said the introduction of the local currency was a wrong move considering the unstable economy the country has been struggling with.

“The new currency was not supposed to come out because the economy was too bad to contain the new currency. There was no single digit inflation, there was a budget deficit, the country was still very dollarized and more so the money supply was very high,” Mugano said at a meeting to discuss the state of the economy report held in Harare on Friday.

“The rains were predicted to be low this year and it seems that’s exactly what we are experiencing right now, there is an excessive erosion of wages which comes with the incapacitation of workers, companies are facing erosion of capital and they are shrinking, electricity is another issue, budget deficit and never a budget surplus and this is amplified by IMF when they released their report on Zimbabwean and they were very clear that Zimbabwe has a pervasive budget.”

Mugano suggested that government should dollarize the economy or consider a dual currency with both the local currency sand the US dollar as the main currencies.

“The ministry of finance has failed to stabilise the exchange rate. There are four different exchange rates that is, the interbank one, black market and the Old Mutual Implied Rate, the speculative rate and the government is supposed to make a decision to either to adopt dollarisation or to consider a dual currency where both the local currency and the US dollar are the main currencies.”

However the governor of the central bank argued that the economy could not fully dollarise as there is not enough foreign currency to support the economy.

“Of cause the economy is still dollarised, but we cannot fully dollarise because we actually do not have the enough foreign currency to support the economy. There is no country that can survive without its own currency. We should all support our currency. This is our currency and we should have faith in it for the betterment of our economy.”

The local currency has been has been on a freefall since its introduction and it has since pushed both the formal and the informal businesses to dollarise.

Fast food outlets, fuel stations, pharmacies, local tenants are now charging for their services in foreign currency or a higher price in local currency.

Mugano maintained that government should come up with policies that would not contradict with their motives in as far as foreign currency is concerned.

“There is policy inconsistence by government where they criminalise the use of foreign currency, but legalised the payment of passports in US dollars. Where do you think they are getting the foreign currency? The foreign currency is there in the black market and something is ought to be done about that. If we do not want to use the foreign currency as a main currency then why are we taxing in foreign currency,” he said.

Mugano added that the country is struggling with foreign currency shortages because there is no production in the manufacturing sector.

“The country is importing many things from maise, electricity, soya beans and wheat which can be grown and generated within the boundaries of our boarders. After we import, there are economic distortions where there are maize and mealie meal, fuel price distortions anchored by corruption. The government should create a business environment that will allow to production to materialise.”

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