Opposition Movement for Democratic Change (MDC) shadow Minister of Finance, Tapiwa Mashakada has advocated for the adoption of full dollarization in the country's economic landscape.
The proposal comes amidst a backdrop of economic instability and debate surrounding the efficacy of such a move.
In a statement, Mashakada said dollarization would make imports cheaper making it a positive effect.
"The MDC proposals for Zimbabwe to adopt full dollarization have been received with mixed feelings. The major reservation has been that the US Dollar is a stronger currency hence it will make our exports uncompetitive. However, the counter argument is that dollarization would make imports cheaper. In that case the net effect of dollarization is positive.
While acknowledging the short to medium-term stabilization benefits of dollarization, Mashakada also highlighted potential drawbacks.
"Dollarization is good for short to medium term stabilisation but the weakness is that the US Dollar is sought after therefore them are dangers of externalization and illicit out flows if it is liberalized without a strong regulatory framework. For these masons, some have advocated for Randirization or Randification. The two terms are used interchangeably to mean the adoption of the South African Rand.
"The only problem with using the rand exclusively is that Zimbabwe has to apply to join the South African Customs Union (SACU) which is comprised of SA, Lesotho. Eswatini and Botswana. The SACU membership depends on compliance with its objective of macroeconomic convergence - which include but not limited to a single digit inflation and 5% budget deficit, which automatically disqualifies Zimbabwe," he said
Mashakada highlighted the importance of reverting to a multi-currency regime, which would not require prior official permission to use currencies such as the US Dollar or the Rand.
"The other hurdle will be the requirement to surrender monetary policy sovereignty to the SA Reserve Bank among a host of other requirements. Given the above, it is prudent do go back to a multi-currency regime which does not require prior official permission to use the US Dollar, Rand or any other foreign currency," said Mashakada
