The President said this during his swearing-in ceremony
held this week in Harare for his second-year term in office. He said the local
currency is the backbone of growth this economy can realize in the next five
years.
The Southern African country adopted a multicurrency
regime, often dominated by the US dollar, in February 2009 as the economic
meltdown resulted in record inflation, which peaked at 200 percent at the last
official count in August 2008.
Presently, Zimbabwe is using a dual currency monetary
regime, a situation that has also been blamed for the volatility of the
domestic unit due to the strong preference for US dollars, which now accounts
for over 76 percent of transactions.
Notably though, wider use of and trade in local currencies
can strengthen a nation’s economic autonomy and sovereignty. Relying on a
foreign currency for local and international transactions can create
vulnerabilities and limit a country’s ability to pursue its economic policies
independently.
By utilising local currencies, countries can assert greater
control over their monetary policy, manage capital flows, and protect their
economic interests. This enhanced autonomy enables nations to respond
effectively to economic challenges and tailor their policies to specific
domestic needs, fostering sustainable development and inclusive growth.
Trade in local currencies strengthens a nation’s economic
autonomy and sovereignty. Relying on a foreign currency for international
transactions can create vulnerabilities and limit a country’s ability to pursue
its economic policies independently.
Fully utilising local currencies can help countries assert
greater control over their monetary policy, manage capital flows, and protect
their economic interests.
While foreign currencies may bring immediate stability for
inflation-ravaged economies, their overly strong nature makes it difficult to
plan for and influence strong growth, especially for jurisdictions still
struggling to lift production.
In his official speech after his swearing in ceremony at
the National Sports Stadium, following his election victory in the August 23,
2023 plebscite, said the local currency was indispensable in the country’s
growth and development agenda.
“The past five years have delivered valuable lessons on our
intricate economy, especially the fact that a national currency that is
supported by a vibrant productive sector is indispensable to sustainable
development. No country has ever developed without its own currency,” he said.
Analysts and economists concurred with the President’s
assertion saying the country will derive benefits more from using its own
currency, and propping it up through measures to drive production is of
critical importance for faster and stronger growth.
Zimbabwe National Chamber of Commerce (ZNCC) president Mr
Christopher Mugaga said the currency issue should be among the key priority
areas of focus for the new Government.
“The timeline of the next five years should be done to dedollarise
and make sure it does not have the green bag operating to run this country.
“Let the currency switch be a key performance indicator
(KPI) for the new Government,” he said.
The Reserve Bank of Zimbabwe (RBZ) has put in place
measures for tight Zimbabwe dollar liquidity meant to curb currency volatility.
Analysts believe the exclusive or widespread use of foreign
currencies, overly strong hard currencies such as the US dollar, make it
difficult for monetary authorities to manage the economy’s monetary policy.
In addition, a strong foreign currency will diminish the
country’s export competitiveness as production becomes more expensive.
Economist Dr Prosper Chitambara said the advantage of using
local currency was that authorities have leverage and control over the economy,
and you can use both monetary and fiscal policy instruments to control
macroeconomic aggregates of the economy.
“It also requires there to be a lot of fiscal and monetary
discipline, because on the flip side, if you are not disciplined, that could be
a recipe for disaster.
Dr Chitambara said local currency was important, but there
was a need to preserve its value closely keeping an eye on the fiscal and
monetary policy performance, especially to control growth in the money supply.
“Therefore, during his second term, the President needs to
hammer home the issue of value addition and beneficiation because, as long as
the country is not doing that, it will be exporting jobs and losing a lot of
money and competitiveness as an economy,” he said.
Zimbabwe’s economy grew by 8,6 percent in 2021, from 6,5
percent last year, and is projected to expand further by 5,3 percent this year,
according to the Ministry of Finance and Economic Development.
Exponential growth in agriculture, resulting in record
output in the production of grains such as wheat and maize, has been the anchor
of this development, supported by mining and infrastructure, among other
sectors.
An enabling business environment driven by supportive
Government policy and ease of doing business, which has been consistent among
other efforts, has allowed Zimbabwe’s economy to register massive growth
despite a whirlwind of problems.
Economist Mr Eddie Cross said the country needed to move to
a single local currency for domestic transactions, which will drive monetary
stability.
“(This) is essential to us building up a competitive
economy in the region. Stability is almost more important than the actual
exchange rate,” he said.
He added that the country has to move away from exporting
raw materials to higher-value products that will allow it to increase job
availability and exports.
“In the past 5 years, we made a start on our infrastructure;
now we need to accelerate this process, and railway capacity is critical,” said
Mr Cross.
Meanwhile, the President further alluded that the country
can only develop and grow sustainably the economy driven by optimum
exploitation of its own internal resources and people, which he often stresses
with the mantra of “Nyika inovakwa nevene vayo/Ilizwi lakhiwa ngabanikazi
balo”.
“The numerous mineral resources in our country must be
sustainably exploited to leap-frog our industrialisation and development. The
lives of our citizens and the fortunes of our country as a whole must be
improved. We expect nothing less,” President Mnangagwa said.
“Our economy must realise maximum benefits from increased
beneficiation and value addition. As such, my new administration, through the
Responsible Mining Initiative, will ensure greater stewardship over our finite
natural resources. These must benefit both present and future generations.
Commenting on the issue of beneficiation, economist Mr
Tinevimbo Shava said the country was losing on potential export earnings
because it has been exporting goods for which we do not control their prices,
but we are price takers.
“Our main problem is the lack of beneficiation, which makes
us exporters of world-governed goods in terms of prices when we could be making
much more. So when prices of some of these goods plummet, we see (the negative
impact of) such a situation,” he said.
He added that Zimbabwe needed to reduce some of its
non-critical imports to promote local industry.
Economist Prof Tony Hawkins believes there has been too
much so much about beneficiation but limited efforts, policy action, and
incentives to drive the agenda, which has been the country’s greatest undoing.
“We just need to walk the talk on beneficiation, and we are
good. Look at our tobacco; yes, we get a lot of export revenues, but we could
be making more if we were processing it into cigarettes and everything
associated with it. So in short, I am not shocked to see the situation that we
are in,” the professor said.
The President also stressed that, given Zimbabwe’s abundant
resources as well as its skilled and hard-working people, it was poised to
claim its rightful place as a competitive manufacturing jurisdiction. He
further discouraged profiteering from business and industry as he urged them to
put people first.
“I exhort industry and commerce stakeholders to be
patriotic and always seek an intricate balance between profit and the plight of
our people. Profiteering, opportunistic tendencies, and greed will not move our
country forward.
“Together, let us grow our country’s manufacturing base to
use, consume, and wear what we produce. The new government will continue to
foster a predictable business environment where capital is safe. Those who want
to invest in our country are welcome, based on respect and mutual benefits, for
shared prosperity,” he concluded.
Dr Chitambara said infrastructure development will remain a
key priority of the new government, but there is a need for sustainable
infrastructure financing.
“There is a need to rope in the private sector through
public-private partnerships, but a lot of infrastructure has already happened
during the first term, and we need to build on that to continue to expand the
country’s infrastructure,” he said.
He said soft infrastructure was also critical, especially
in enhancing the productivity of citizens. He noted that soft infrastructure
included health, education, and even social protection. Herald
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