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Mnangagwa reiterates call for mono-currency

by Staff reporter
13 Oct 2023 at 06:15hrs | Views
President Mnangagwa has announced that Zimbabwe will transition back to using its local currency as the exclusive legal tender, discontinuing the multi-currency system. He emphasized that a country's development relies on having its own currency.

During his second-term swearing-in ceremony, President Mnangagwa expressed the government's commitment to reinforcing the use of the domestic currency as a foundation for sustainable economic growth and development.

The current arrangement, allowing foreign currencies like the US dollar and South African Rand, will remain in effect until December 2025, as per Statutory Instrument (SI) 118A of 2022, titled "Presidential Powers (Temporary Measures) (Amendment of Exchange Control Act) Regulations 2022." These measures align with the National Development Strategy 1 (NDS1) spanning from 2021 to 2025, which outlines the government's five-year economic blueprint.

Addressing participants at the 9th CEO Africa Roundtable conference in Victoria Falls, President Mnangagwa stressed the necessity of adopting a single currency. He addressed concerns about the upcoming end of the multi-currency regime in 2025 and recounted the historical context that led to Zimbabwe adopting a basket of currencies in 2009.

"In 2009, our domestic currency collapsed, and a committee was formed, which I chaired, to address the currency issue. To survive, we created a basket of currencies and let our currency phase out," President Mnangagwa explained. "While it may have been a challenging decision, it saved our economy at the time."

President Mnangagwa affirmed that a country cannot achieve growth without its own currency. He acknowledged that the existence of multiple currencies in the economy is unsustainable and advocated for the adoption of a single, local currency.

Recently, the Treasury assured the market of its commitment to bolstering the local currency's value, thereby restoring consumer purchasing power and supporting economic recovery efforts. The government remains steadfast in its policy to promote the use of the local currency, citing its positive impact on the overall economy.

Zimbabwe adopted a multi-currency system in 2009, predominantly featuring the US dollar, to combat inflation. Currently, the nation operates with a dual currency monetary system, largely due to the strong preference for the US dollar, which accounts for over 76 percent of transactions.

A multi-currency regime refers to a situation where a country uses other currencies alongside its own. Broad adoption and trade in local currencies can strengthen a nation's economic independence and sovereignty. Relying on foreign currencies can create vulnerabilities and limit a country's ability to implement independent economic policies.

Utilizing local currencies empowers countries to have greater control over their monetary policies, manage capital flows, and safeguard their economic interests. This autonomy enables nations to effectively respond to economic challenges and tailor policies to specific domestic needs, fostering sustainable development and inclusive growth.

During the recent Zimbabwe Economic Development Conference (ZEDCON), stakeholders urged the government to provide a clear roadmap for currency reform. As the 2025 deadline approaches, the financial sector has become hesitant to issue long-term foreign currency loans.

Source - The Herald