Emmerson Njanjamangezi, Group Features Editor 
ANALYSTS say the proposed BRICS single currency would be a solution to some of Zimbabwe’s economic challenges, which have lately been headlined by currency volatility.
It comes as the foreign affairs ministry has said the country is willing to join the grouping’s unified currency proposal among other trade pacts.
BRICS is an acronym that started as BRIC in 2001, coined by Jim O’Neill — a Goldman Sachs economist — for Brazil, China, India, and Russia. Later in 2010, South Africa was added to become BRICS.
Economic analysts who spoke to The Financial Gazette this week coalesced on the point that the BRICS unit would benefit Zimbabwe.
Former Reserve Bank of Zimbabwe (RBZ) Monetary Policy Committee member, Eddie Cross, said the Zimbabwean situation presents no other option, but to join BRICS.
“Zimbabwe remains the most isolated African State and joining BRICS would be a step forward. But, I think the prospects of doing so are slim.
“Using the Yuan would have little impact on our currency crisis, but might help us with international payments because of the restrictions involved in using the Swift system.”
Eddie Cross Cross is a former member of Parliament and a member of the RBZ’s Monetary Policy Committee.
On his part, Victor Bhoroma said joining the BRICS bloc will be beneficial for Zimbabwe in so many respects, but would not be the answer to the economic and currency crisis obtaining in the local market
“Joining the BRICS will be beneficial in terms of market access for Zimbabwean products and probably in terms of being able to lure investments into the country considering there could be bilateral trade agreement between member countries that Zimbabwe can be able to benefit from, that is if it’s actually approved to join such a trading bloc.”
But when it comes to the currency crisis that is prevailing in the country, Bhoroma said joining the BRICS will not retire the teething structural problems confronting the economy.
“The currency crisis is actually man-made to be precise and obviously the institution, which is at the centre of the crisis is the central bank.
“This is largely because of its involvement in various quasi-fiscal operations that have an effect of growing the money supply, which is not in tandem with economic growth.
“In addition to that, the indiscipline that we have in the government where non-core expenditure is leading to unbudgeted outlay.
“To compound the issue, the absence of reforms, such as the implementation of a market-driven exchange rate, continues to heavily weigh down the economy.
Bhoroma further lamented that the increase in money supply and fiscal indiscipline means that the government would from time to time use the central bank as the second financing arm.
“It could be through arbitrary printing of money or through abusing the overdraft facility which limits government borrowing from the central bank to 20 percent of the previous year’s collectable tax revenue.
Christopher Mugaga, the ZNCC chief executive officer.
“In the past, we have seen even domestic borrowings through treasury bills and various other securities has gone up. Obviously, the refinancing of such securities would necessitate the printing of money.
“We know the government is spending more than it can collect in terms of tax revenues. Then the absence of a market-driven exchange rate wattles down all the confidence all the market players may have in the local currency.”
Without a market-driven exchange rate, Bhoroma said various holders of foreign currency especially exporters and diaspora remittances recipients, NGOs that receive funds from the international markets do not liquidate their foreign currency on the formal market where the prevailing exchange rate is pegged by the central bank.
“So, joining the BRICS does not enforce reforms on the government or the central bank. In addition to that, it does not change the culture of governance or probably the fiscal indiscipline that we have in the government.
“Probably the propensity to control the allocation of foreign currency that we have in the central bank does not joining the BRICS to be addressed they definitely need reforms within the central bank in terms of governance,” he further said.
Chief executive of the Zimbabwe National Chamber of Commerce (ZNCC), Chris Mugaga, also said joining the BRICS was a step in the right direction.
“Zimbabwe does not have a currency crisis. The challenge, which is appearing as the currency crisis is fundamental problems. The solution does not lie in going for the BRICS currency, the Yuan or the Rand Monetary Union.
“The solution lies in handling the financial factors that drive macro-economic stability and then in the process then deliver the currency stability. We don’t have to labour and push hard on the currency debate. It’s not the issue. If you look at the whole liquidity management side in this economy it can tell you that it’s not sustainable to have a local currency when the market is swamped especially with the US dollar,” he said.
However, economic analyst Tony Hawkins said the BRICS are large economies and Zimbabwe’s only connection is political rather than economic.
Market watchers claim that the global economy will be dominated by the four BRIC economies by 2050.
Developing countries, led by China and other BRICS members, have been successfully organising alternative sources of credit flows, aiming for financial stability, growth, and development.
Professor Tony Hawkins
With their goals of avoiding International Monetary Fund loan conditionality and the dominance of the US dollar in global finance, according to market watchers, the new BRICS initiative represents a much-needed renovation of the global financial architecture.
The new initiative is set to provide an alternative to the prevailing Bretton Woods institutions, loans from which are usually laden with prescriptions for austerity — with often disastrous consequences for most third-world economies.
BRICS nations established the New Development Bank (NDB) in 2014, as an alternative to the World Bank and the International Monetary Fund.
In addition to launching NDP, BRICS established a liquidity mechanism known as the Contingent Reserve Arrangement (CRA) to assist members experiencing payment difficulties.
With Egypt, the United Arab Emirates, Uruguay, and Bangladesh joining the NDP in 2021, the CRA initiative looks highly attractive to developing countries.
With Zimbabwe hamstrung with the US sanctions embargo since 2001, the BRICS initiative looks too alluring for Harare.
Faced with limited lines of credit, a high debt overhang and a dearth of foreign direct investment, the BRICS initiative offers a new lease on life.
newsdesk@fingaz.co.zw
