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Finance Minister defends continued use of weakening local currency

Finance and Economic Development Minister, Mthuli Ncube has defended the continued use of the weakening Zimbabwe dollar, saying redollarising the economy could be catastrophic for the country.

Ncube was responding to Matabeleland South proportional representation legislator Sipho Mokone’s question in the National Assembly Wednesday on why the government was hesitant to ditch the local currency which has been ravaged by inflation.

We have seen so many tricks that you have tried to employ to resuscitate the economy but it is not working.

Why can you not dollarize once and for all? You are saying that you have given people leeway to go outside the country and get goods – how are they going to get those goods when they are paid in RTGs?

“We have seen so many tricks that you (Ncube) have tried to employ to resuscitate the economy but it is not working,” said Mokone.

“Why can’t you dollarize once and for all? You are saying that you have given people leeway to go outside the country and get goods – how are they going to get those goods when they are paid in RTGS?”

Ncube however said allowing the exclusive use of the US dollar would be bad for the country.

“At the moment, you have a choice,” said Ncube.

“We have dual currency in the main and that is wonderful. If you decide you want to accept USD only, obtain the USD. It is up to you and you have a choice to do that. That does not exist in other countries but we also want to make sure that our own ZWL$ is circulating and it is our accounting currency.”

He said during the Unity Government (2009-2013) dollarisation, the country experienced deflation.

“Deflation means that we had negative growth and that was totally undesirable,” he said.

“We also had an increase in bad debts and that is why we ended up creating ZAMCO (Zimbabwe Asset Management Corporation) to clean up the problem that was created by the USD. The competitiveness of our industry was basically shut down. We just became a nation of importers and we de-industrialised and that destroyed our industry which has only been resuscitated by the introduction of the Zimbabwe dollar during the Second Republic.”

He said during the USD regime, Zimbabwe had no foreign currency.

“We had no reserves,” he said.

We could not even pay our foreign debts. We only began paying our foreign debts after introducing the Zimbabwe dollar. It has given us the leeway to do what we do. During the Unity Government, Ncube said Zimbabwe could not fix roads.

“We borrowed money from South Africa to do the Plumtree-Harare-Mutare Road,” he said.

“This time around, we are not borrowing, we are using our own resources and that capability has been afforded by the introduction of our own domestic currency. If you introduce the USD only, tomorrow you will wipe out the banking sector completely because you have to convert all those Zim dollar balances into USD. You will wipe out the bank balances of companies. Is that what you want? You will create a serious situation if you adopt the USD in this country. It is a very bad idea.”

He added: “No Minister of Finance should want that because it means you are walking on one macroeconomic tool when the toolbox is incomplete. You only have a fiscal policy but no monetary policy. So, it is a bad idea.”

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