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US Dollar Not a Solution to Zimbabwe Cash Crisis: Chakravati


Zimbabwe’s liquidity problems are a result of the country’s continued use of the United States dollars and dollarization is not a viable option as it makes the economy uncompetitive, a senior economist has said.

In an interview with 263Chat during a breakfast meeting held in the capital on Tuesday, Professor Ashok Chakravati said dollarization is not a viable long term solution to the country’s currency problems suggesting the adoption of the Rand which he said would help solve cash problems.

“Dollarization is not a viable long term solution to the issue of currency, the solution is to have a non-convertible and non-externalisable currency, which is weak against the United States dollar.

“We have been a dollarized economy since 2009.

There is no country in the world which has succeeded in keeping a dollarized economy for a long period of time without having a special relationship with the suppliers of dollars,

“Zimbabwe has no source of US dollars, …and what l can say is that dollarization is not a solution,” said Chakravati.

He added that the South African Rand is a weak and non-convertible calling for it to be used for pricing, wages and salaries.

“I recommend the RBZ to go a route of terrain whereby South African authorities have no objections of the rand circulating freely in Zimbabwe, what they don’t want is for Zimbabwe to be in the common monetary area.

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“Adequate Rand supply can be obtained from direct purchases of Rand from Reserve Bank of South Africa, BSA, Diaspora remittances, access of local banks to the South African financial system.

“There is no need to join the CMA, only an agreement is needed with RSA that Rand can circulate freely between Zimbabwe and South Africa”, he said.

Chakravati said Bond Notes should not be at par with the US dollar.  

“I am of the opinion that the Reserve Bank has actually taken a very commendable direction in terms of the introduction of Bond notes, they have been very careful about it over the period of time.

“Now the problem is the peg with the US Dollar, it must be removed and let the bond note trade freely and if it means to be 80 cents to the US Dollar its fine as long as it trades freely,” he said.

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