1 August 2014

Zimbabwe: Sticking With Us Dollar a Dead End - Biti

Photo: Flickr
South African twenty rand note.

ZIMBABWE must adopt the South African Rand as the country's economy will not recover under the current US dollar-dominated multi-currency environment, opposition MDC Renewal leader Tendai Biti has said.

Finance Minister Patrick Chinamasa recently voiced concern about the downside of the multi-currency environment but ruled out any changes or bringing back the reviled Zimbabwe dollar in the medium term.

But speaking at a public meeting on the performance of the economy organised by the Media Centre, Biti, who now leads a faction of the MDCT, said as long as there is no production to back the US dollar, the revival of the economy will remain a dream.

He said the main reason why Zimbabwe should ditch the US dollar was not because of its source but the method and cost at which Zimbabwe is getting it from the American Federal Reserve.

"We can actually use firewood as a medium of exchange, it can work," said the former finance minister.

"Money is just an infrastructure of facilitating the base which is production. The challenge is that this economy is collapsing because it is not okay.

"We are not producing; the capital account is not okay, the current account is in deficit these are the things that you need to fix. These are the structural things that you need to fix.

"But the debate on currency is relevant because the US dollar has become overvalued. We don't have an economy to sustain that. We don't have the current account to sustain that, which is the export and the imports."

Zimbabwe adopted the multi-currency regime in 2009 after the local dollar had become virtually worthless due to hyperinflation.

The move ended the inflationary problems and stabilised the economy. Chinamasa recently admitted that production costs had also spiked making local products uncompetitive.

Biti said the problem was that the US dollar was overvalued in Zimbabwe.

"What we need to do is to devalue the US dollar but you can't do that because you don't print it," he said.

"Now there are calls for the return of the Zimdollar and this will be a disaster. We propose that the US dollar should be devalued by bringing in the rand as the official currency and joining the Rand Monetary Union."

"However the tragedy is that these guys in Zanu PF cannot afford to meet the requirements of the central bank of South Africa, they just can't do that," he said.

He said Zimbabwe needs a national dialogue to arrest the collapsing economy as the ruling party had failed to instil investor confidence through laws such as indigenisation that have scared away investors.

"We need dialogue of all stakeholders because these comrades have failed to carry this nation forward," he said.

Speaking at the same event, economist Takunda Mugaga said Zanu PF needed a rethink on its policies, adding the ruling party must move to address the problem of investor confidence.

"We have corruption which is just but too much, we have a bloated government that is too big for this economy; all this needs immediate attention," he said.

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