RESERVE Bank of Zimbabwe (RBZ) governor John Mangudya Thursday shut the door on any prospects of the country adopting the South African rand as its main currency, insisting no currency in the world would reduce misbehaving locals’ appetite for hard cash.
He was however, firm that the country’s battered economy was well on course for a miraculous rebound.
The central bank chief said Zimbabweans were too much fixated on the types of currency to use for their daily transactions while forgetting the damage caused by their own speculative behaviour when they handle hard currency.
“We have said it many times that it’s not a currency phenomenon in Zimbabwe,” he said.
“… If you can’t discipline yourself under a US dollar as a settlement currency, the same person is going to use the rand to do the same.”
Mangudya was guest speaker at Dr Ibbo Mandaza’s Southern African Political Economy Series (Sapes) Trust, an elite dialogue forum often patronised by diplomats and the intelligentsia.
He blamed locals for ignoring central bank pleas to use plastic money while preferring to spend hours outside banking halls so they could then use cash withdrawn for speculative purposes and for expensive exports.
The RBZ chief further said the country was not exporting enough to plug the hard currency deficit.
Zimbabwe’s government and the central bank are under pressure from some locals to dump the US dollar and adopt the more easily accessible South African rand as its main currency.
Locals say the rand use would best suit an environment in which some of the country’s trading partners in the region were already using it.
But Mangudya said Zimbabwe’s economic situation was totally different.
“The use of the rand as a settlement currency is potentially very inflationary when the fundamentals are not addressed.
“Otherwise you are going to suffer from what we call money illusion; you are thinking about too much money,” Mangudya said, adding that a multi-currency system that incorporates the US dollar, rand, euro and others was best for the country.
“Let’s be disciplined first before we go to other currencies. Nothing will change if we just go to other currencies.
“It’s not about the quantity but its usage of money. People have got rent seeking behaviour.”
He said banks were disbursing up to US$10 million daily in terms of cash withdrawals.
The former CBZ chief executive said it was by a miracle that the Zimbabwean currency survived all the pressures it has been subjected to over the years.
He refused to be drawn into comments that the current government’s destructive policies have had a greater hand in the worsening cash crunch.
Mangudya insisted he was an economist and not a politician.
“Those who want to dwell on politics should go and campaign. That one is an open field. If you want to dwell on politics, go and campaign become an MP then you change the status quo by way of policies,” he said.
He was however not too shy to apportion blame on sanctions which he said have increased “compliance risks” on international banks which used to give Zimbabwe lines of credit.
The foreign banks, Mangudya said, have responded by closing Zimbabwean accounts for fear of suffering “contamination risk”.
Despite all the negatives, he said, the country’s economy was on “a rebound” after government and the central bank have introduced a number of incentives to increase exports as well as reduce demand for cash.