The government has said Zimbabwe, whose currency is being ravaged by galloping inflation, cannot afford to redollarise, citing foreign currency shortages in the country.
Addressing Employers Confederation of Zimbabwe (EMCOZ) congress in Bulawayo on Thursday, industry and Commerce Minister, Nqobizitha Ndlovu, said the country should instead initiate a dialogue on how challenges of foreign currency could be addressed.
Zimbabwe, on June 24 reintroduced the local currency which had been ditched for a multicurrency basket in February 2009 after inflation had rendered the Zimbabwe dollar worthless.
The recently reintroduced local currency is already failing, with industry players hinting it was time to redollarise to save the country from further economic collapse.
“I think we need to have increased transparency in the foreign currency market,” said Ndlovu.
The minister explained that the availability of foreign currency would ensure that the economy improves without necessarily dollarising.
He said on top of addressing the foreign currency challenge there was also a need to strengthen the local currency.
“We need to address the issue of currency stability,” said Ndlovu.
“This is very important in any way, particularly when you want to discuss foreign direct investment. Any investor wants to get a fair return on their investment. They want to be able to expatriate or repatriate their investment, but in a climate where the currency is not stable and foreign currency is perennially a challenge, it might not be possible.”
Ndlovu said he was confident that the Zimbabwe dollar would one day become stronger.
“I think is important that we stabilise our currency. Our currency will stabilise. In this, I have confidence. We need to defend our local currency. We cannot afford, and this is my view, we cannot afford to redollarise,” he said.
“I do not believe our economy grew under dollarisation, it stabilised. I will tell you that the only time we ever reached 50 percent capacity utilization is 2011; otherwise, we averaged between 35 and 42 percent.”
EMCOZ acting president, Israel Murefu told had earlier on told the congress, re-dollarisation, which the minister said Zimbabwe could not afford, was imminent and unavoidable.
“The worry is that the forces of dollarisation are fast coming back through the pricing mechanism in the economy,” said Murefu.
“What is happening is that everyone who is selling any commodity, will first say, what was the price in US Dollar before the Zimbabwe dollar came back. If the price was, say US$2, they will then say, ‘what is the exchange rate? Let’s say the exchange rate is at ZW$14, they will not price using that bank rate, they will use a higher rate, say ZW$20. If I have US$2 in my pocket, the price becomes attractive compared to paying ZW$40 for something that costs ZW$$28. This is where the dollarisation comes in.”
Murefu added that Zimbabweans were still living in a US Dollar environment in their minds as evidenced by the continued greenback pricing mechanism.