The Reserve Bank of Zimbabwe deputy governor Dr Khupukile Mlambo said the country will not adopt the South African rand as its currency although the United States dollar has not been the ideal option.
Dr Mlambo admitted the greenback has given authorities“headaches” owing to liquidity challenges caused by leakages.However, joining the common monetary area using the rand would not be an option because Zimbabwe does not have its own currency.The Zimbabwe dollar ceased circulating in 2009 when the country adopted a multi-currency system.“We need to understand the South African rand has its own challenges, it is volatile,” said Dr Mlambo at a National Economic Consultative Forum workshop held in the capital yesterday.
There have been calls from business and the general public for Zimbabwe to join the rand monetary union to enhance its competitiveness.The union comprises of Namibia, Lesotho, Swaziland and South Africa itself.“Other countries in the union like Namibia have their own currencies which they use together with the rand. South Africa prints the rand for its market not the region because there is a risk that the money will flow back into the country and become deflationary.
“Personally, I would have been happier if we adopted any other currency than the USD. It has created headaches of liquidity and it would have been better to use another currency,” said Dr Mlambo.The strengthening of the USD against regional currencies weakened the competitiveness of Zimbabwean products on the regional market, which adversely affected the local industry.The USD has appreciated by 45 percent, which means local industry and products also became 45 percent uncompetitive.
According to the International Monetary Fund, South Africa last month regained its position as the region’s biggest economy after the rand gained more than 16 percent against the USD year to August, after over a year of weakness. But projections are that it will weaken in the long term as the US Federal Reserve is likely to keep tightening interest rates.
Dr Mlambo, however, reinforced the monetary authorities’ view that a currency cannot be imposed on citizens and that monetary decisions were also based on past experiences.“We have lessons learnt from 2008. You cannot force a currency on people. In 2008, we realised people were already transacting in foreign currency, Zimbabweans made that choice,” he said.Economists have added their voice to the currency debate arguing that Zimbabwe needs to scale-up production and exports to improve the economy.
Change in currencies alone, be it the rand, pula, kwacha or yuan will not turn around the economy if production remains low. The turnaround will have to be earned through vibrant economic activity.