Former finance minister Tendai Biti, has warned against the re-introduction of the local currency saying doing so would be the 'stupidest' thing for the ZANU PF government to do.
Biti's comments come after a South Africa newspaper reported recently that the government was secretly working on re-introducing the Zimbabwean dollar. The Mail & Guardian said the aim would be to escape a 'funding crisis that now threatens to undermine government operations.'
However, Biti told SW Radio Africa's Cutting Edge programme that the Zimbabwean dollar stood to be rejected yet again by the market. He said:
"While it will be stupid to bring back the Zimbabwean dollar let us remember that ZANU PF is known for doing stupid things. There is nothing that can stop them from printing the Zimbabwean dollar; they can print trillions of that but how will they get them into the market? They might force it on the civil servants but all service providers will reject that money.'
He added: 'There is no country in the world that has dollarized involuntarily like we did that has been able to get back to its own currency. They tried it in Cuba that failed.'
Biti said Zimbabwe was faced with a serious economic crisis caused by lack of revenue, capital flight, distortion in the balance of payments and over borrowing. Capital flight is when money or assets rapidly flow out of the country as a consequence of an economic situation. Balance of payments is the difference in total value between payments into and out of a country.
According to Biti, at the moment the ratio of exports to imports is 7:1 meaning that for every dollar that is coming into the country seven dollars is going out. He said:
'That has created a serious liquidity crisis because more money is going out than is coming in'
Biti said the situation has been worsened by the fact that billions of dollars have left the banks and the stock exchange. Moreover the government is collecting less in the form of revenue due to shrinking economic activity. As a result he said, the government has been borrowing to finance the wage bill. Biti said since August last year government has borrowed over $600 million for salaries and the lenders were no longer willing to continue.
Biti added that Zimbabwe needs a 'caretaker government' which will rescue the economy from further collapse. He said among the core tasks for that government would be to freeze unnecessary expenditure, repeal the 'unfriendly' indigenisation laws and re-engage with the West, including the International Monetary Fund.