Farai Mabeza, Senior Staff Writer 
AUTHORITIES say the country’s de-dollarisation thrust is on course, although they will not divulge timelines and the progress made to date, for fear of stoking the parallel foreign currency market.
“We don’t want to give too much information lest people take a position against the currency (Zim dollar). That’s what policy makers always grapple with. How much information do you give out?
Finance Minister, Mthuli Ncube
“We have a roadmap. Ultimately, what you really want is to have just one currency, which is the Zim dollar. We will get there. That’s the end game.
“But sometimes revealing the exact hard steps you take as you get there can be problematic,” Finance minister Mthuli Ncube told business leaders at a well-attended Daily News breakfast forum in Harare last week.
“We will do as much as we can to reveal the steps that we are taking, but we will also try to hold back a bit to avoid people taking positions,” he added.
This comes after economist Eddie Cross recently told the country’s number one business publication, The Financial Gazette, that it was time Zimbabwe ditched the United States dollar — while the International Monetary Fund (IMF) also called on authorities to phase out exchange controls and the current multi-currency regime.
It also comes as authorities have always said they believe that the local currency is key for industrial and economic growth in the country — attributing the manufacturing capacity utilisation surge from 47 percent in 2020 to 66 percent in 2021 to the re-introduction of the Zimbabwe dollar in 2019.
Speaking in February this year, Reserve Bank of Zimbabwe (RBZ) governor John Mangudya said the plans were to go big on the local currency by 2027.
“We are asking for patience from Zimbabweans. We are looking at a five-year period to de-dollarise. It does not mean that we won’t be having the United States dollar in this economy.
Reserve Bank of Zimbabwe governor, John Mangudya
“But the proportion of the usage of the Zimbabwe dollar will be higher than the US dollar. The Zimbabwe dollar will be used as a store of value, which is very important,” he said then.
Cross said two weeks ago that the sole use of the Zimbabwe dollar would collapse the resurgent parallel market, which is hovering above $300 to the greenback.
“What this would also do is reduce inflationary pressures that are currently being experienced.
“What is required is to adopt the Zim dollar as the sole currency of exchange in the domestic market and to convert all incoming foreign exchange flows into local currency on the interbank market.
“They (authorities) should commence buying operations for US dollars on the interbank market to ensure that the exchange rate does not become too strong and, therefore, inhibit the competitiveness of our exporters,” Cross added.
Another economist, Pascal Mandeya, also told The Financial Gazette this week that the only viable currency for the country going forward was the Zim dollar.
“The government can’t sustain expenditures such as salaries in US dollars.
“We don’t have the reserves and no one, particularly the IMF, is willing to lend us money because of sanctions and uncleared debt.
“The Zim dollar is the one that is sustaining the government. Most revenues are in Zim dollars and there are capital projects such as road construction, which cannot wait,” he said.
However, Mandeya also said in the meantime, there must be improved management of access to the country’s foreign currency resources.
“There are certain people that must not be given foreign currency. We must restrict imports of things we can manufacture locally.
“Access to foreign currency must not be based on the ability to pay for it, but on how the forex is going to be used,” he added.
On his part, CZI president Kurai Matsheza urged caution on de-dollarisation, saying the government should first come up with a clear plan on this.
“That every sovereign nation must have its own currency is a given. However, in the Zimbabwean set-up, what needs to be understood is how and why we got to a point where our currency was lost.
“Certainly, economic fundamentals were lost and the domestic currency lost value to the point where the general population lost faith in it.
“So, in principle … Zimbabwe must have its own currency. This is not to say this must happen tomorrow, but at some point,” Matsheza said.
“The authorities have to set a clear de-dollarisation roadmap. This roadmap has to have defined pegs along the way. When those are being achieved, then the march towards the Zim dollar is attainable.
Christopher Mugaga, the ZNCC chief executive officer.
“My guess is that this is a no less than five-year journey,” he said, adding that the country must, in the meantime, continue with the multi-currency system.
“The policies and actions on a daily basis must be supporting the broad intent (of de-dollarisation). If that is done on a sustainable basis without flip flops, then de-dollarisation will be achieved.
“The building of sufficient reserves to support our own currency is key. Macro-economic stability has also got to be sustained.
“Exports have to grow and imports reduced, and we must have value addition of our minerals and agricultural products,” Matsheza also said.
Zimbabwe National Chamber of Commerce chief executive Chris Mugaga said the government would need to work on its policy framework to make the Zim dollar fully accepted in the market.
“The currency we are going to use is a function of the policies we are going to put in place … as long as the monetary regime is still pointing to money printing, then the choice is limited to the strong US dollar presence in this market.
“We just need to remove or limit money supply growth. When an economy is not moving significantly and you print money, what it means is that it’s too much money chasing too few goods and in the process that’s how money loses its value.
“So, the first policy is the need to switch off the taps of money supply, and secondly, the perception of the central bank. It has to be seen to be independent to instil confidence in the market,” Mugaga told The Financial Gazette.
Gift Mugano
While CEO Africa Roundtable chief executive Kipson Gundani was generally supportive of the Zim dollar, he said that in the meantime the country was better off with the greenback because of a lack of trust in both fiscal and monetary and authorities.
“We have a history of mismanaging our currency and wanton money printing fuelled by huge public expenditure.
“Given that history, if there is no change in discipline by monetary and fiscal authorities, we are better off with a currency we have no control over and cannot print.
“The biggest backer of any currency is confidence. We don’t have that for the Zim dollar,” Gundani said.
Economics professor Gift Mugano said the current multi-currency system was unsustainable, arguing further that the country was better off using the US dollar as the sole currency of trade in the interim.
“The call to have a single currency makes sense. The current scenario in which we have two currencies, the US dollar and the Zim dollar, is creating serious distortions to the extent that we now have three exchange rates.
“These are the rates that are informing the pricing regime in Zimbabwe and this has led to massive distortions, a lot of rent-seeking behaviour and corruption.
“There is no economy that can be run under this kind of framework. So, if we must use one currency it should be the US dollar for now … because we do not currently have the right fundamentals to move to the Zim dollar,” Mugano said.
“First, we must have fiscal consolidation where we would have cleared our debt. We have seen national debt going to US$20 billion, doubling in the last three years.
“Our appetite for debt is increasing when we should be reducing it to stabilise our currency. We also need a current surplus and … we must also have single digit inflation.
“We must also have stable exchange rates, which we don’t have. This militates against the local currency and weakens it as a store of value. We must also have a budget surplus or small deficit.
“Yes, we might claim to have a small deficit, but it is a deficit we are reducing at the cost of having real productivity,” Mugano said further.
He also argued that the government itself was causing confusion by giving mixed signals on de-dollarisation.
“Government itself is re-dollarising. Last year’s bonus was paid in US dollars. Covid-19 allowances and pensions are being paid in US dollars.
“In February, the minister of finance announced the payment of part of public sector salaries in US dollars. That is a clear indication by the government that they are re-dollarising.
“So, before the market wipes out the Zim dollar, the government must swallow its pride and avoid indicating to the right when they are turning left.
“In any case, even if the government does not like it, the market will make it (full dollarisation) happen by June this year,” Mugano also said.
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