Source: Zimbabwe incapable of maintaining US dollar: Chakravati | The Financial Gazette March 30, 2017
ZIMBABWE could soon be forced to adopt the South African Rand as it is incapable of maintaining a strong US dollar, an has economist said.
Speaking at the Confederation of Zimbabwe Retailers (CZR) symposium to mark 100 days of bond notes circulation, economist, Ashok Chakvarati said no other economy except Peru can sustain the US dollar since Zimbabwe had no special relationship with the US Federal Reserve.
“There is no country in the world that has successfully used the US over a long period of time. There should be a special arrangement with the US monetary system which means the country will be getting fresh injections of the US dollar from time to time,” said Chakvarati.
Zimbabwe officially adopted the US dollar for transactionary purposes in 2009 following a protracted period of hyperinflation, but the currency has over the years been mopped out of the economy through externalization where hordes of cash pass through the country’s porous borders.
The country’s major sources of foreign currency are exports, lines of credit and humanitarian aid.
“Unless you have a special relationship with the source, the use of the US dollar will be an impediment to the economy. We have become the source of the US dollar for the rest of Africa through leakages,” Chakvarati said.
The bond notes, drip fed Zimbabwean economy has failed to maintain the required liquidity ratio of 15 percent with statistics revealing that only US$420 million against US$900 million is currently circulating in the economy.
“We need US$900 million to US$1 billion in the cash system,” said Chakvarati.
Nostro accounts according to the Reserve Bank of Zimbabwe (RBZ) have depleted to US$170 million against a target of US$250 million, resulting in the growing challenges of foreign payments.
He said the bond notes that are backed by a US$200 million facility from Afreximbank were not a permanent solution to the liquidity challenges in the economy.
RBZ Deputy Governor, Kuphukile Mlambo weighed saying, it would be prudent to adopt the Rand so as to benchmark prices with South Africa.
“It would make sense for us to use the Rand so that we can benchmark with South Africa,” said Mlambo.
Mlambo said Zimbabwe’s challenge is a public that holds US dollars as a store of value which results in scarcity of the currency on the market, adding that the solution to externalisation was to stop using the US dollar.
The RBZ has released US$102 million in bond notes into the economy since November last year.
Although the bond notes have eased cash shortages as witnessed by lesser bank queues, the surrogate currency has not generated the much needed exports, according to the central bank.
“We are pleased with the downstream benefits to the economy that we have less queues but the US$200 million is insufficient to cover the US$900 million gap,” Mlambo said. – FinX
COMMENTS
Ashok Chakvarati is a ZANU propagandist. The ZANU government did not make Zimbabwe a Dollar economy. The market did. As the current system collapses due to the ZANU government theft of depositors money the market will re-dollarise in much the same fashion as before. That is soon all important goods like food and fuel will only be available for Dollars while the RTGS currency and bonds will be for paying taxes.
The government will be forced to eat its own funny money while most economic activity moves to the parallel market. Ordinary Zimbabweans without access to dollars will find life increasingly difficult.
There are no know cases of dollarised economies reverting back to their own currencies or any other currency without significant changes in economic performance.
This whole article is an exercise in backward ZANU thinking that can only lead to more failure and is full of false information
Mlambo and Chakvarati are both stupid people. Get rid of No 1 and most problems will be solvable.
I repeat again. RGM is a low level human species. He is an ignoramus of unmeasurable proportions. That is why he is so lonely, always pointed with the snout of a gun.
HE IS AN ALFA ALBATROSS ON ZIMBABWE CITIZENS’ NECK
Economics language you have to do maths,bookkeeping or accounts then commerce .Not to take any war veteran to run the economy it’s not like hitting the target one man one bullet zanu idiots .lastly it need fresh ideas fresh mind energetic people then the results will be 93% .Any Zimbabwe is the only country in the World with an ancestor as the president.unbreakable Guinness world record