Zimbabwe’s continued use of the United States dollar is no longer sustainable for the economy as it hurts industry’s competitiveness, a Cabinet minister has said.
Industry and Commerce minister Mangaliso Ndlovu told a conference convened to discuss the impact of the Reserve Bank of Zimbabwe’s latest monetary policy statement held by
Alpha Media Holdings (AMH) in Harare on Friday that he did not support the continued use of the US dollar.
In 2009, the country adopted a basket of currencies anchored on the greenback after it dumped its Zimbabwean dollar when it was rendered worthless by record-setting hyperinflation.
But since over half of Zimbabwe’s trade is within the Sadc region, particularly South Africa, using the greenback made Zimbabwean products more expensive when compared to others originating from the region.
“I am not a proponent of using the US dollar. I think I have made my point clear on this one.
“I do not believe it is good for our economy, I do not believe it is good for competitiveness of our products, more so now, when everyone is talking about the exchange rate because of the liberalisation that was done on the 20th of February,” said Ndlovu at the AMH Conversations titled: “Opportunities for Industry”.
With trade and investment between the US and Zimbabwe averaging less than US$200 million per annum, the country has struggled to generate adequate levels of the greenback for internal and external use.
According to Finance minister Mthuli Ncube, Zimbabwe lost about 50% of its competiveness in terms of export commodities by using the US dollar as a transacting currency as well as a local currency.
As a result, the country has been unable to sustainably generate foreign currency that meets both the local and external demand in terms of cash circulation and the importation of raw materials.
Last week, Ncube told Bloomberg TV that the country would introduce its own currency within the next 12 months to ease the internal and external demand for currency.
Confederation of Zimbabwe Industries president Sifelani Jabangwe blamed the shortage of foreign currency on a loss in confidence in government and monetary authorities.
“For business, the period from October can be described as a very hectic one,” he said.
“The policy measures that have been put in place are in line with a lot of our requests in terms of removing distortions in the market.
“But, unfortunately, a lot of them are coming at a time when there has been a loss of confidence and I must agree to some extent mistrust of government intentions.
“Then we have the introduction of the interbank market and unfortunately at the moment there have been lots of buyers, but sellers have been non-existent.
“Unfortunately, what we are hearing from the seller is that the rate that is on the market is not the market one, which is why we are finding players doing transactions outside the formal system.”
Jabangwe said government should create a platform where sellers and buyers could come together and discuss the best way forward.
“The lack of confidence in the official platform has now resulted in sellers not coming to the market,” he said.
“We believe if the (interbank forex market) is based on a willing buyer/willing seller platform the rate will effectively come down.”
Many businesses are currently not operating because they cannot access foreign currency to import critical raw materials.
Economists have also argued that using the US dollar as a stronger currency means that it will be costly to get it with the RTGS dollars unless one is willing to pay for its true value.
Parliament’s public accounts committee chairperson and former Finance minister Tendai Biti is on record calling for the adoption of the South African rand, which the country has better access to in terms of trade and investments.