Business / Economy
'Continued US$ use threat to Zimbabwe economic growth'
15 Dec 2015 at 05:09hrs | Views
Finance and Economic Development Minister Patrick Chinamasa yesterday said there was need to craft strategies to address challenges posed by the appreciation of the US dollar against the currencies of the country's main trading partners, particularly South Africa.
Zimbabwe adopted a multi-currency trading regime in 2009, but transactions are carried out mainly using the US dollar.
The use of the US dollar has meant that Zimbabwe has become an attractive export market for most countries, particularly South Africa and China. Foreign products land in Zimbabwe at cheaper prices mainly because of high production costs in the country, rendering local products uncompetitive.
Minister Chinamasa said Zimbabwe needed a strategy on how to survive in the current context, but also highlighted that perhaps it was even time to start "seriously" thinking about a local currency.
"We have to come to terms with the fact that we are a US dollar denominated economy, that we are a mini United States in the centre of countries whose currencies are depreciating almost on a daily basis," he said.
"Thinking or talking about our own currency is almost like a no go area, it's almost like a taboo and yet also those are areas that we need to start talking seriously about so that we can see how we can address the issue of the appreciation of the US dollar against our trading partners currencies."
Centre for Financial Regulation and Inclusion (Cenfri) technical director Hennie Bester said Zimbabwe's use of the US dollar had worked well at inception but was now militating against economic growth.
"The multi-currency regime worked well from a productive point of view to round about 2012 but thereafter the dollar exchange rate against your primary trade partners declined.
"The US dollar is a double edged sword, it has stabilised your economy but it is killing it at the same time and South Africa is not helping you because the exchange rate of the rand to the dollar is worsening," he said.
Mr Bester said liquidity challenges being experienced were because Zimbabwe was not receiving much in terms of Foreign Direct Investment whilst the little that was available was being taken out of the country through food, fuel and other imports. — New Ziana.
Zimbabwe adopted a multi-currency trading regime in 2009, but transactions are carried out mainly using the US dollar.
The use of the US dollar has meant that Zimbabwe has become an attractive export market for most countries, particularly South Africa and China. Foreign products land in Zimbabwe at cheaper prices mainly because of high production costs in the country, rendering local products uncompetitive.
Minister Chinamasa said Zimbabwe needed a strategy on how to survive in the current context, but also highlighted that perhaps it was even time to start "seriously" thinking about a local currency.
"We have to come to terms with the fact that we are a US dollar denominated economy, that we are a mini United States in the centre of countries whose currencies are depreciating almost on a daily basis," he said.
Centre for Financial Regulation and Inclusion (Cenfri) technical director Hennie Bester said Zimbabwe's use of the US dollar had worked well at inception but was now militating against economic growth.
"The multi-currency regime worked well from a productive point of view to round about 2012 but thereafter the dollar exchange rate against your primary trade partners declined.
"The US dollar is a double edged sword, it has stabilised your economy but it is killing it at the same time and South Africa is not helping you because the exchange rate of the rand to the dollar is worsening," he said.
Mr Bester said liquidity challenges being experienced were because Zimbabwe was not receiving much in terms of Foreign Direct Investment whilst the little that was available was being taken out of the country through food, fuel and other imports. — New Ziana.
Source - the herald
