THE addition of several currencies, to those already in use — United States dollars, South Africa rand and others — by the Reserve Bank last week, though welcome, will not do much to alleviate the economic crisis the country is facing, analysts have said.
In her maiden Monetary Policy Statement presentation last week, acting Reserve Bank governor Charity Dhliwayo reiterated that the feared return of the Zimbabwe dollar would not be on the cards.
Instead, she added more currencies to the basket as if to further allay fears.
The Zimbabwe dollar was phased out at the beginning of 2009 after record hyperinflation rendered it useless confidence in the unit disappeared..
Despite several pronouncements by President Robert Mugabe on the bringing the local currency back into circulation, there is no appetite for its resuscitation in the foreseeable future. Just the mere suggestion sends shudders down the spines of Zimbabweans who bore the brunt of worthless banknotes running into trillions and other unusual denominations resulting in empty shelves in retail shops as well as the complete halt of essential services such as health and education.
The introduction of the multi- currency regime went some way in breathing life into what had become a comatose economy. However, it has failed to address several challenges such as a severe and persistent liquidity crunch, lack of competitiveness of locally produced goods, inadequate and erratic service delivery as well as low capacity utilisation.
“We wish to advise exporters and the general transacting public that in addition to opening of accounts denominated in Botswana pula, British sterling pound, euro, South African rand, United States dollar, individuals and corporates can also open accounts denominated in the Australian dollar, Chinese yuan, Indian rupee and Japanese yen,” Dhliwayo said.
She said the move had been necessitated by the increasing trade between Zimbabwe, China, India, Japan and Australia.
Former finance minister and MDC-T shadow finance and economic development minister Tendai Biti said the addition of currencies alone would not revive the fragile economy.
“It doesn’t make a difference even if you add a 100 more currencies,” Biti said. “The problem is the crisis of production and the collapse of aggregate demand.”
Although Biti said he “liked and respected” the RBZ’s Monetary Policy statement, the problems the country faces are not monetary but fiscal.
Biti warned that the country’s spiral into deflation would significantly reduce economic activity regardless of the additional currencies injected into the economy.
Deflation is a decline in prices often caused by a reduction in the supply of money or credit, and a decrease in government, personal or investment spending.
“It does not matter what currency you use in a state of deflation, it becomes academic,” Biti said.
Economist Eric Bloch applauded the move but added that the difference would be minimal.
“The introduction of additional currencies is a very good thing,” Bloch said. “It will marginally increase liquidity in the economy and make a small difference.”
Former Zimbabwe National Chamber of Commerce president Oswald Binha said the introduction of additional currencies was “cosmetic.”
“The difference is the same,” Binha pointed out. “We should be dealing with fundamental issues that deal with attracting foreign direct investment and investment into the productive sector.”
He said the country was in a tripod scenario. The first, he said, was having the resources as well as the human capital in the country. The second being the lack of capacity to exploit the resources and the third being a deformed work ethic.
Binha said there was need to deal with critical issues that include accountability, efficiency and refining the country’s competitiveness in terms of economic redirection.
“We need to see how we can create a social budget to efficiently utilise our productive sector,” Binha said.
He added that there was also need to look at vulnerabilities within the banking sector as well as other concerns such as rampant corruption within both the public and private sector.
“If we do that the dashboard will be clearer,” Binha said.