CZI is right: Dollarisation is bad for Zimbabwe

HARARE - It is not a secret that I am not a fan of the current government’s economic policies and choices.

I especially find it reprehensible that they continue to avoid solving the prevailing currency crisis choosing to focus instead on bizarre projects such as building a new capital city- talk about fiddling while Rome is burning.

It seems they are just going to let fate decide to bring back the US dollar. I am, however, not convinced that us using the US dollar as our main currency is a good thing.

I think it’s part of the reason why we are in this mess. Believe me I am not trying to absolve the government of any guilt. They certainly had a hand in landing us in the quagmire.

We see more companies wanting to sell in US dollars, but the issue is that we don’t need dollarisation as an economy. The economy will shrink by as much as 50 percent if we dollarise, so for me it is not the right way to go.

We have seen it with US dollars in the past that we won’t be competitive when using the US dollar.

I am not sure about that 50 percent claim this guy is making.

It seems like a made up number meant to make people pay attention.

“Experts” do it all the time and it’s unlikely this is accurate. If anything any shrinkage will be a result of inflated GDP prices created by the bond note 1:1 exchange rate delusion the government likes to maintain.

I, however, totally agree that using the USD will make Zimbabwean goods expensive in the southern African region where we have weak currencies such as the rand, metical, Namibian dollar (pegged to the rand) and the two kwachas.

Conversely it will make imports from these countries cheaper and with
rampart smuggling ultimately destroy the very small industry that we
have.

It is understandable that people are nostalgic about the short-lived boom that we had  back between 2009-2013.

After a hyper-inflationary period that saw people lose faith in their currency people took comfort in the very stable very widely accepted USD but apart from the fall of the GNU in 2013 something else happened to create the current liquidity crisis.

The rand — South Africa is our largest trading partners in the region — went on a slide.

The result South African imports became even cheaper and people started importing everything and I mean everything. I would go to Mbare and see people selling oranges from South Africa, potatoes from South Africa, clothes from South Africa, drinks from South Africa, rice from South Africa, chicken bits from South Africa, shoes from South Africa. Remember the Twizza craze?

South Africa already has a well developed industry that can make a lot of things cheaper than we can ever hope to, add to that the boost they got as their currency depreciated against the USD dollar and the Zimbabwean industry had no chance.

By the time the government moved in to levy tariffs and ban certain items, the damage had already been done and the industry never recovered.

The fact that former president Robert Mugabe’s government was going ahead with confusing indigenisation exercises did not help.

I know it’s difficult, but it is not impossible, to join the rand Union but this is the reason why I have been an advocate of us taking that route.

It will at least make sure that our local industry is not at a disadvantage merely because of exchange rates. The least the government could do is depreciate the bond a bit otherwise there is zero point in us having a local industry especially given the fact that the local population now has a taste for imported matches and whatnot!

Berate me, but adopting the dollar is not going to change the fact
that we consume more than we produce. It will see whatever little USD
we have being vacuumed by our neighbours. It will not change the fact that we have an increasingly command economy. It will certainly not improve our fortunes. I am afraid.

Comments (1)

In as much as I am also not an MDC supporter but a seasoned social and economic analyst, if I talk about reasoned analysis which is leading to people demanding payment in US$ when they know that all the forex we get in this country is through exports and diaspora remittances (+ donations) people will get bored. So i will just simplify it by saying that, "The people are saying leaders have messed us up since 1980 it is now time for everyone to get messed up." "KUDIRA JECHA" musadza risina muriwo. So what is the solution? Let us start afresh on a clean slate, back to the fundamentals, we are Africans first, then supply and demand, and in social terms -THE HIERARCHY OF NEEDS.

ADF - 5 January 2019

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