Zimbabwe will not reintroduce its national currency any time soon as it has some way to go to attain key enabling fundamentals, central bank Governor Dr John Mangudya has said.
The Reserve Bank of Zimbabwe will forge ahead with bond notes and manufacturing stimuli to improve liquidity, with incentives worth US$45,8 million soon to be extended to exporters.
Zimbabwe has been battling United States dollar cash shortages since April on the back of regional greenback demand, externalisation and increased circulation of money outside formal financial structures.
Depositors are spending hours in banking halls, only to get between US$50 and US$100 daily. Last week, some banks in Harare were dispensing coins, saying they had run out of US dollar notes. There were reports that certain businesses were levying five-10 percent on withdrawals by depositors.
In coming weeks, authorities will issue bond notes worth US$75 million in US$2 and US$5 denominations, backed by the African Export-Import Bank. The market has been apprehensive about this, fearing the return of the previously volatile Zimbabwe dollar and scrapping of the multi-currency system.
Dr Mangudya told The Sunday Mail that the domestic currency would only be reintroduced when sound foreign exchange revenue was guaranteed.
He said monetary authorities would not “force bond notes on anyone”, adding that the notes would constitute just three percent of money in circulation. An independent panel will oversee issuance of the bond notes.
Dr Mangudya said: “Zimbabweans should understand that introduction of bond notes doesn’t mark the return of the Zimbabwe dollar through the back door. We can’t just say the Zimbabwe dollar has returned when we haven’t achieved the macro-economic fundamentals or conditions that allow us to use our currency.
“Key economic fundamentals or conditions for the return of the local currency involve balancing the export bill against the import bill for over a year. This means the economy has the capacity and ability to generate foreign exchange to meet its domestic and foreign requirements, development and promotion of foreign exchange revenue streams.
“Without this, there’s no way we are going to return to the Zim dollar. If Government has a balanced and sustainable budget, that way we will be able to return to our local currency.”
He continued: “We should attain sustainable interest rates as the current interest rates of around 15 percent are still too high for the market. The country should have high consumer and business confidence, and a sustainable level of inflation for it to have its own currency.
“A healthy job market is something we should have as a country then talk about the return of our currency. The country is still very far from attaining these economic fundamentals, hence, the Zim dollar will not return any time soon.”
Economist Dr Gift Mugano threw his weight behind the RBZ chief.
“I concur with Dr Mangudya on the conditions that should be achieved first before the country uses its local currency. We should have a minimum foreign exchange reserve equivalent to one year of import cover which means that we should have a reserve of foreign currency we can use to import for one year without exporting even a single commodity.
“If we reach a level of backing our currency with our gold reserves for a year or more, we can be able to bring back our currency. As it stands, we can’t as we haven’t achieved any of the stated economic fundamentals.”
Another economist, Dr Albert Makochekanwa, added: “ . . . the use of any local currency has to be underpinned by economic fundamentals like import cover for the whole year, sustainable inflation, interest rates and a healthy job market, among other economic conditions.
“Bringing back the Zimbabwe dollar now is not viable as confidence is still low . . . given the history that we have in the country as far as the central bank’s printing of money is concerned. Over and above, the (RBZ) Governor is right in waiting for the right time to print our own local currency; certainly not this time.”