LOCAL monetary authorities should consider currency swaps with China and other current economic powerhouses, Ambassador Christopher Mutsvangwa has said. The adoption of the multiple-currency system in January 2009 has been accompanied by persistent liquidity challenges, which has had debilitating effects on efforts to steer the economy on a sustainable growth path.
"The Government should consider currency swaps with major economic powerhouses, for instance, China among the BRICS (Brazil, Russia, India, China and South Africa) countries.
"Why don't we get into a currency swap with the Chinese or include the yuan in our basket of currencies? Around 2006, the Chinese wanted a currency swap with us where the two trading countries would agree to use their different currencies, but there were no takers.
"China has already done a currency swap with Japan and South Korea, and trade among those countries is growing," he said.
He was speaking on the sidelines of a symposium in Harare last week.
Ambassador Mutsvangwa said a currency swap would help in precluding the effects of the present liquidity crunch that is negatively affecting the local business community.
A currency swap is basically a foreign-exchange agreement between two parties to exchange aspects of a loan in one currency for equivalent aspects of an equal in net present value loan in another currency.
In June, Brazil and China indicated that they will soon be signing an agreement to swap as much as US$30 billion in their two currencies. The currency swap, worth 60 billion reais or 190 billion yuan, is touted as the first step in a broader agreement with Russia, India and South Africa to allow members of the BRICS group of emerging markets to pool resources to better deal with the global financial crisis.
Ambassador Mutsvangwa also told participants at the event that the United States government is no longer interested in maintaining its economic sanctions on Zimbabwe as it was losing out on business opportunities in the country. The US has in recent times been showing a thawing approach on its hardline approach on economic relations with the country, with outgoing US Ambassador to Zimbabwe Dr Charles Ray leading the charm offensive on the local front.
Ambassador Mutsvangwa said he met some senior US government officials in Washington two weeks ago who said sanctions were costing them business opportunities in Zimbabwe.
"The US wants to re-engage with Zimbabwe regardless of the political status. The officials I met said they are looking for an opportunity to drop sanctions. It's now a mere formality that sanctions will be lifted. We expect progress to be made within the next 12 months," he said.
The development has, however, been met with scepticism from the Affirmative Action Group. AAG chief executive officer Dr Davison Gomo said it was unlikely that the US would execute a fundamental change in its stance towards Zimbabwe unless there was a change in government.
"As AAG, we are very skeptical about any indications towards the removal of sanctions from the US Administration. Their statements are not backed by fact nor are they backed by intention.
"They have a permanent interest in putting in place a government that acquiesces to their economic interests.
"If they do however lift the sanctions, we will welcome the move, but their change of attitude has nothing to do with anything Zimbabwe has done in recent times. The sanctions have never been about lack of democracy in the country," he said.