Reserve Bank of Zimbabwe Monetary Policy Committee member and former MDC parliamentarian Eddie Cross has rubbished suggestions that Zimbabwe should re-dollarize saying the country cannot throw away advantages and gains made through the use of the local currency.
Cross who is also an economist told a recent webinar that the Zimbabwean RTGS dollar remained the dominant currency on the market.
“There is absolutely no possibility of us dollarizing and anybody who thinks otherwise really just doesn’t know the facts. The reality is that 92% of all transactions in Zimbabwe are in RTGS dollars and are conducted by electronic means,” he said.
Zimbabwe adopted the US dollar as the local trading currency in 2009 to curb runaway inflation.
The move succeeded in stabilising the economy but with the currency being the strongest in the region, imports increased and local production suffered.
“From a policy point of view, it would not be in our favour to move towards a dollarized economy. Previously when we dollarized we didn’t fully understand the implications.
“And one of the main implications was that we literally destroyed our productive sector. We just simply could not compete and the one great advantage of what’s happened in the last 18 months or so is that our economy at long last is competitive and so we have a situation now where exports are growing at about 17 to 20 percent annum.”
Cross said after the reintroduction of the local currency Zimbabwe now has a balance of payments surplus and imports are actually declining.
“If you dollarize you will destroy that immediately. So I don’t see us abandoning the currency and I think what we have to do is exactly what we are currently doing which is defending the local currency and making sure its stable and making sure that it reflects its real value.”
Cross derives more confidence from the performance of the recently introduced foreign currency auction system where the forex rate has not only stabilised after months of crashing on the parallel market but has actually gained in value against the US$ though marginally.
“The experience of the last two months shows that’s possible especially the auction this week where for the second week running the local rates strengthened slightly and just, for example, for August we are expecting inflation to be virtually zero. I think that pretty much destroys the case for dollarization in any shape or form.”
The local currency was up 0.75% in the latest auction which saw it trade at 82.6993 against the US$ this week.