The Sunday News
THE Reserve Bank of Zimbabwe has said it has no plans and capacity to bring back the Zimbabwe dollar anytime soon but rather concentrate on building confidence in the multi-currency system.
Addressing the business community on the last day of the Zimbabwe National Chamber of Commerce annual congress in Victoria Falls on Friday, RBZ Deputy Governor Dr Kuphukile Mlambo said the conditions to bring back a local currency after trading in multi-currency were very strict as the country needed to build enough reserves in terms of import cover.
“We need to build confidence in the institutions. People need to know that once a currency comes we won’t respond by just printing money every time there is a problem, which means also we need to bring very strong fiscal rules.
“Although inflation is a monetary phenomenon, its base is the fiscus because central banks print always to cover a deficit. So unless you have very strong rules on the fiscal side you won’t solve your problems,” Dr Mlambo said.
He said RBZ was taking action to decommission the Zimbabwe dollar as evidenced by the demonetisation process it was undertaking through financial institutions.
“The central bank is not in any discussion to bring back the Zim dollar rather we are taking every action to ensure that we decommission the Zim dollar. We are taking every action to build confidence in the multi-currency system that’s what we are concerned with. So all those rumours that it’s (Zim dollar) going to be printed in China are all nonsense,” Dr Mlambo said.
United Nations Development Programme economic advisor Mr Amarakoon Bandara said reintroducing the Zim dollar in the immediate future was not an option as there was a need to work on stabilising the economy as well as managing its debt stock.
“In the previous remarks by the Chamber they referred to policy credibility and consistence. These are fundamentals in having a situation where you need to introduce a local currency. So it is a long way to go, in the immediate five years or so there is no way Zimbabwe can introduce a local currency,” Mr Bandara said.
He, however, said the country could work on re-introducing its own currency through putting in place the required fundamentals to boost the confidence of its citizens.
“But remember nowhere in the history of the world has a country which has dollarised ever gone back to use its local currency.
“There are reasons to that – the benefits of dollarisation are much higher in terms of economic stability and market integration.
“At the same time there is a cost if you want to re-introduce a local currency converting of dollar assets into local currency when you want to and because of those two reasons none of the countries that have dollarised have considered re-introducing the local currency,” Mr Bandara said.
