Emmerson Njanjamangezi, Group Features Editor 
BUSINESS remains supportive of the broad use of the Zimbabwe dollar in the economy and wants the government to lead from the front in affirming the under pressure local currency.
This comes as Reserve Bank of Zimbabwe (RBZ) governor John Mangudya has said that one of his major policy thrusts for this year will be bolstering the currency.
Speaking to The Financial Gazette this week, the chief executive of the Zimbabwe National Chamber of Commerce (ZNCC), Chris Mugaga, said business was backing the central bank fully on the wider use of the local currency.
Reserve Bank governor John Mangudya and Finance Minister Mthuli Ncube
“As business, we are in support of … Mangudya. We feel he is on point with regards to the use of our local currency.
“With all the equipment we have and the rising capacity utilisation, we will crash and become a supermarket economy again if we continue on the path of dollarisation.
“It is unfortunate that the central bank is being let down by other government institutions, some in the private sector and the general citizenry who continue to demand the US dollar when we know of the adverse effects of using the international reserve currency, especially to the productive sectors of the economy,” Mugaga said.
He added that with the coming in of the African Continent Free Trade Area (AfCFTA), the use of the US dollar was not sustainable and would continue to render Zimbabwean products uncompetitive.
“Our focus now should be on how we manage the local currency. We need to fight dollarisation.
“Look at countries like Angola, Bolivia, Venezuela who have all used the greenback at some point. It’s not easy to exit this phase.
“The currency issue is about confidence. The governor has been trying all he can to promote the use of our local currency for the benefit of the country. He needs support,” he also said.
The president of the Confederation of Zimbabwe Industries (CZI), Kurai Matsheza, also said the generality of business had always supported the wide use of the local currency. That said, he added, industry and commerce wanted the government to take the lead and demonstrate resolutely all round that it had confidence in the Zim dollar.
Kurai Matsheza, CZI president
“We have always been encouraging the broader use of the local currency, more particularly in terms of government itself.
“For example, there are certain taxes that authorities have been asking to be paid in US dollars.
“So, if we are talking of driving in the direction of a mono-currency … those steps have to start with the government itself,” Matsheza said.
He also observed that an even broader use of the Zimbabwe dollar would help to curtail inflationary headwinds.
“Of course, the use of the local currency on its own will not tame inflation, but as long as authorities use other levers like strict money supply, this will be helpful.
“Very importantly in this regard, there is need to deal with the parallel exchange rate,” he added.
This also comes after Mangudya told The Financial Gazette last week, on the sidelines of a CEO Africa Roundtable breakfast meeting in Harare, that it was important for business to get insight into monetary policy strategies for them to be able to plan adequately.
“This is a very important forum and I am happy that we were invited here at the beginning of the year, where business wanted to have an insight into strategies of where we are going this year, such that they will be able to factor this into their own annual strategies.
“The monetary policy stance for this year will be around the promotion of the broader use of the local currency, containing inflation and refining the foreign currency auction system in a bid to foster stability in the local market.
“This is important to share with industry because they will then know what we are planning and what we will be doing for the rest of the year, such that they can come up with their own strategies,” Mangudya said.
He also noted that the global economy had entered 2022 slightly weaker than anticipated due to the Omicron coronavirus variant and the rising global inflation.
Eddie Cross Cross is a former member of Parliament and a member of the RBZ’s Monetary Policy Committee.
“We will thus, be further tightening monetary supply this year to ensure that inflation is curbed. For Zimbabwe, inflation has been growing, but the financial conditions are accommodative of growth and the country is working towards stability. We need to stay the course.
“We must keep on the path of de-dollarisation and ensure that we maintain the balance of increasing the broader use of the local currency, while maintaining the stability in the market. People need to understand that de-dollarisation is a process that takes time.
“We will pursue that in a responsible manner by monitoring developments so that we do not upset the ongoing economic recovery that has been achieved over the past three years,” Mangudya said further.
Economist and former RBZ Monetary Policy Committee (MPC) member Eddie Cross said the broader use of the local currency was the best way forward for the country.
“We are in the same situation that we were in 2009, where the country had effectively dollarised and the local currency was not used at all.
“It now all depends on what measures the central bank will take to strengthen the local currency.
“If they adopt effective means of strengthening the local currency and emphasise the use of the Zim dollar for local settlements, then I don’t see any problems,” Cross said.
“I think that is what is required. I don’t think we should dollarise. That would have a serious impact on our productive sector.
“But we have to deal with this runaway parallel market rate. There is no choice. If we don’t deal with that, the impact on our country will be disastrous,” he added.
Brains Muchemwa, economist
On his part, economist Lloyd Mlotshwa said the broader use of the local currency required that the government accepted and promoted the use of the Zim dollar in tax payments.
“I believe that if the authorities have conviction in the use of the Zim dollar, a first step would be to ensure that the tax legislation reflects that confidence rather than exporters paying tax in US dollars or importers paying duty in US dollars. Those should be payable in Zim dollars. That would create consistent and sustainable demand for the local currency and strengthen the unit.
“In the absence of such pronounced measures, the market will always default to the stronger currency and this process is already well under way,” Mlotshwa said.
“Such a policy would also create pressure to ensure that the pricing mechanism for Zim dollars via the auction becomes more reflective to protect value,” he added.
Another economist, Brains Muchemwa, said the broader use of the Zimbabwe dollar was an easier path to follow should the government show confidence in the currency.
“The government is the issuer of currency and also the single biggest economic agent in this economy. While all other economic agents accept the local currency in its many forms, the government, through Zimra, is selective in its acceptance and that is the single biggest dent of confidence in the use of the local currency.
“The central government has to lead by example and show confidence in the currency it prints and owns by demanding that all taxes be paid in the local currency,” Muchemwa said.
“That creates a huge demand in the local currency and with the RBZ intervening with the appropriate monetary policy instruments to support the currency, the Zim dollar will be in broader use,” he added.
The Zimbabwe dollar was re-introduced in June 2019 following a 10-year absence after it lost value massively.
Subsequently, the government embarked on a five-year de-dollarisation plan, where authorities committed to playing a pivotal role in ensuring that the country moves towards the broader use of the local currency by 2025.
newsdesk@fingaz.co.zw
