Zim dollar return a “detrimental” threat

via Zim dollar return a “detrimental” threat | SW Radio Africa by Alex Bell  December 13, 2013 

The return of the Zimbabwean dollar has been described as a threat that holds “detrimental” consequences for the already struggling economy, according to observers and analysts.

Speculation about the possible return to the local dollar has been rife in recent weeks, in the face of a worsening liquidity crisis, with Zimbabweans expressing concern about what this will mean for them.

Former Education Minister in the unity government, David Coltart, told SW Radio Africa that he received reliable information that a new contract has been awarded in Bulawayo to revive a printing press which used to be used to print the Zim dollar.

“The memory of the Zimbabwe dollar and the attendant destruction of people’s savings and lives is still too fresh in the minds of people, especially rural people who suffered the most; so if this is done it will be done at a huge political and economic cost,” Coltart said.

The Reserve Bank of Zimbabwe and new Finance Minister Patrick Chinamasa have moved to dispel rumours that the local currency would be returning. In a statement Monday, acting RBZ governor Charity Dhliwayo ruled out any “imminent return” of the Zim dollar.

“There have also been press reports suggesting that Fidelity Printers and Refiners, a subsidiary of the Reserve Bank, is putting in place measures in preparation for the resumption of the printing of the local currency,” said Dhliwayo.

“The Reserve Bank wishes to unequivocally put it on record that such reports have no basis whatsoever. As Monetary Authorities, we wish to assure the business community and members of the public that there are no plans to reintroduce the Zimbabwean dollar in the near future,” Dhliwayo added.

But according to the former Finance Minister Tendai Biti, a return to the local currency could be likely, because of “the clueless state of the State.” Citing the myriad of economic problems facing the now solely ZANU PF run government, Biti said in an opinion piece that “the easy and inevitable solution will be to print the Zimbabwean dollar and unleash the cataleptic energy of the printing press.”

Biti also warned that the government will return to a voucher system: “They will print US$ vouchers as they did in January 2009 which will be paid to civil servants. Certain retail outlets will be forced to accept and redeem them. The retail outlets will then be compensated later on.”

The introduction of the multi-currency system in 2009 gave Zimbabwe a semblance of economic stability, after hyperinflation left the Zim dollar completely worthless.

Economic analyst Masimba Kuchera told SW Radio Africa that this system is still the best option for Zimbabwe, saying a return to the Zim dollar would be “detrimental.”

“There is a lot of speculation and the country is under economic pressure. But I think there is a realisation that any return to the Zim dollar would be detrimental for any progress made over the last five years,” Kuchera said.

He explained that because the country is dependent on importing the majority of its consumer goods and because it longer has a production based economy, the return to the worthless local dollar “would precipitate the downward spiral of the economy and it would not be revived.”

“When you have your own currency it needs to be backed up by production in the economy. So for the country now, it is better to have a multi currency system,” Kuchera said.