'Full dollarisation of Zimbabwe economy will never happen'

ZIMBABWEANS must cherish the partial dollarisation that is in place, and stop dreaming about full dollarisation, Reserve Bank of Zimbabwe (RBZ) Governor, Dr John Mangudya, said yesterday.

Speaking during discussions at the Chamber of Mines of Zimbabwe annual conference, which ends here today, Dr Mangudya said Zimbabweans were "full of negativity" over issues happening in their country, which was not the case in countries that could be facing far worse issues than those being experienced locally.

"Let's cherish partial dollarisation. As we continue under partial dollarisation, do not undermine the other currency because of US dollars," said Dr Mangudya.

"The problem with Zimbabweans is that we always wish ourselves bad. When you listen to conversations, you just hear people saying ‘zvakaoma' (things are tough). There is nowhere in the world where it is easy.

"Just this other day, (US) President (Joe) Biden was concerned over shortages of infant formula in his country. President Biden invoked the Defence Production Act to address the shortages of infant formula."

The Defence Production Act that President Biden invoked requires suppliers of formula and manufacturers to fulfil orders from local companies before other customers, to remove bottlenecks.

The US president also allowed the US Department of Defence to use commercial aircraft to fly formula supplies that meet federal standards from other countries to the US under what was known as "Operation Fly Formula".

Formula shortages were sparked by Abott Nutrition's recall of the product over safety-related concerns, and the general supply chain challenges that are going on across the world due the geopolitical issues in Eastern Europe where Russia is undertaking a special military operation in Ukraine.

As a result of the supply chain dislocations, prices of gas, fuel and food products have risen by about 40 percent across the world, with shortages of cooking oil being experienced even in the United Kingdom.

Dr Mangudya said the price of a tonne of cooking oil has risen from US$900 in recent months to about US$2 000 now, due to supply chain disruptions. He said since the challenges were global, there was no need to be "too negative".

"The power of negativity is weighing down positivity. We need to be positive. As long as I live, I am positive. I thank the Lord for the gift of life. Why are we destroying our economy?

"We want to tame inflation; but it is not an RBZ issue alone, it is not a Government issue alone, it is everyone's task. Let's defend our currency, we don't want the power of inflation to devour us.

"Who are these people that are pushing up inflation either at night or in the morning? We are still looking for them and we have suspended some companies from borrowing from banks because they were engaging in speculative borrowing."

Dr Mangudya said investigations into the illicit activities of the companies are still underway and the nation will be updated in due course.

Dr Mangudya said full dollarisation was "not a vaccine" or cure for inflation, but confidence in the local currency was key.

He gave the example of the US dollar which is not backed by anything, but has value, on the back of peoples' confidence in it.

Until 1971, the US dollar was backed by gold until then US President Richard Nixon severed the direct convertibility of the currency into gold to curb inflation and prevent foreign nations from overburdening the system by redeeming their dollars for gold.

Dr Mangudya said full dollarisation would be detrimental to the economy as was seen in the period 2009 to 2018, adding that apart from Panama which receives support from the US, no other country had full dollarisation.

"As Zimbabwe, we are on our own and we cannot go the full dollarisation route. If you were dreaming of full dollarisation in Zimbabwe, that must stop. Let us stop speculative attacks on our currency. People who engage in speculative attacks on our currency are the same as witches."