eBusiness Weekly
Michael Tome
De-dollarising Zimbabwe’s economy will be a cumbersome process likely to take the country over five years to complete, according to the Reserve Bank of Zimbabwe (RBZ) governor, Dr John Mangudya.
Zimbabwe dollarised its economy from February 2009 to February 2019, a process that brought a modicum of price stability, economic growth and lowered inflation.
However, while responding to industry players and investment analysts who were seeking clarity on the tenure of the dual currency period the country finds itself in at the moment, Dr Mangudya said all countries that dollarised had difficulties in coming out of the situation.
Zimbabwe’s own currency was reintroduced on the local market in February 2019 and has been working alongside other currencies significantly the South African Rand and the United States dollar.
Dr Mangudya noted that the local currency was still at its infancy and required more time to operate solely in the country. He said other regional countries have gone through longer span of time to achieve full de-dollarisation.
Addressing delegates at the Confederation of Zimbabwe Industries (CZI) annual economic outlook for 2022 in Harare on Thursday, Dr Mangudya indicated that the de-dollarisation process required Zimbabweans to be patience.
The central bank chief highlighted that other regional countries had taken an excess of five years to de-dollarise thus setting the local transition to de-dollarisation at five years, which he considered as ambitious.
“If you look at countries like Angola, Ethiopia and Zambia, they have taken a long time – some six years and others seven years. It does not happen overnight, we now have two years or about with our local currency, it is still a baby.
“We are on a journey to de-dollarisation, there is no country that can develop without its own currency, so those who are not clear of where we are going, currently we are using a dual currency some people call it multi-currency and it is more like we are in transit but we shall never forget where we are heading.
“…so I’m talking patience to Zimbabweans, in simple terms we are looking at a period of five years ourselves which is very ambitious,” said Dr Mangudya.
He added:
“Countries that have de-dollarised they do not do it overnight. I see sometimes there is wish to fast track things. No. We will not fast track this, de-dollarisation will be a gradual process brick by brick, stone by stone.”
Head of fund management at Imara Asset Management Zimbabwe, Shelton Sibanda, had bemoaned lack of clarity on the de-dollarisation roadmap, citing that it was clouding investors’ judgments of the economic outlook in terms of currency.
He pointed out that the unclear de-dollarisation process was leading banks to hold on to funds because of uncertainty and that was disturbing the disbursement of loans towards the sectors that required funding.
“There is a bit of a logjam to a certain extent in this economy, where on one side bankers are hesitant to lend even in local currency terms because of the inflation aspect, on the other side we have seen US dollar deposits increasing but banks are hesitant as well to lend long-term because there is no clarity around the multi-currency regime in terms of the tenure, “said Sibanda.
However, the general sentiment by the industrialists at the meeting was that the local economy strongly required local currency to anchor the significant amount of economic activity going on.
On the flipside, Dr Mangudya highlighted that the main thrust of his monetary policy statement was focused on stemming inflation and managing the foreign exchange rate in the current year.
“The main thing that is left in this economy is the volatility of exchange rate which is a journey also. You cannot do it overnight again, so we are going to continue to pursue tight monetary measures in this country. We are going to stay the course to make sure that the foreign currency system is dependable and inclusive,” said Dr Mangudya.
