The proposed new currency is a positive step towards achieving the country’s monetary policy autonomy, but low level confidence with the Central Bank poses the greatest threat to its sustainability, financial experts have warned.
Last week Friday, President Emmerson Mnangagwa announced that Zimbabwe will have its official currency by year-end, a development set to spell an end to the multi-currency regime adopted in 2009.
Analysts say the new currency will establish a single currency regime likely to give sufficient levers to Central Bank to craft effective monetary policy.
“The difference between the RTGS dollar we are having today and what is being proposed is that, the RTGS is just part of the family of the multiple currencies, so we are in a multi-currency regime. So when he (President) talks about our own currency he simply means is we need to do away with all other currencies and leave one currency in the basket and that becomes a local sovereign currency, that’s the difference,” economic analyst Persistent Gwanyanya told 263Chat Business in an interview.
“What we have is a pseudo currency, just a unit of account, a standard for official settlement. So when we want to have a single currency regime, it, means all other currencies, the USD, Rand, and so forth will have to be outlawed for local use,”
“Fundamentals are not a one day event, You may wait and they may never come and in fact one of the things we need is to have a stable currency for those fundamentals to be achieved, so what I can say for now, in terms of improved fundamentals is the rebalancing of the fiscal position, from huge deficits to surpluses, that is a great score from treasury,” added Gwanyanya.
This comes amid worsening frailties in the functioning of the multi-currency regime, as the RTGS dollar continues to depreciate against the rest of the currencies in the basket.
Market watchers are however skeptical of the sustainability of a new currency given current low levels of confidence on the already circulating local RTGS dollar in the market.
Official statistics reflect that currently there is an over 250 percent increase in USD circulation in the local market to US$ 1 billion from US$ 300 million in 2016 yet foreign currency for external payments remains scarce.
“We are transacting more foreign currency locally and outside official payment systems, than we are on external payments. What this simply shows is that we do not have confidence in our local RTGS dollar and we are failing to embrace it but instead we use the USD and the Rand more for local transactions,” Gwanyanya added.
Another economic expert, Pepukai Chivore fears skepticism that surrounded the RTGS dollar introduction a few years ago might as well spell doom for the new currency if authorities fail to address confidence issues affecting the Central Bank.
“The problem with the RTGS dollar is that it was introduced as an export incentive, but to now claim that a pseudo currency is now a national symbol is impossible. Moreover there is need for a fresh currency given the confidence deficit in the Bond note which has led to tumbling of the exchange rate,” said Chivore.
Earlier this year, IMF Resident Representatives for Zimbabwe, Patrick Amir Imam said strengthening of independence of the RBZ and improving its governance and controls are key to stabilizing its currency regime.