By African News Agency and The Source
Gaborone and Harare – The Reserve Bank of Zimbabwe (RBZ) has ruled out the adoption of the South African rand, or joining the sub-regional Rand Monetary Union (RMU), citing the volatility of the currency.
Addressing a National Economic Consultative Forum (NECF) meeting in the capital Harare this week, RBZ deputy governor, Dr Khuphukile Mlambo, said while the US dollar was not an ideal currency on account of the numerous “headaches” that came with it, adopting the South African Rand carried more risks.
“We need to understand that the South African Rand has its own challenges: it is volatile,” Dr Mlambo said.
He pointed out that while joining the RMU, which is made up of Namibia, Lesotho, Swaziland and SA itself, seemed attractive as an option to enhance business competitiveness, the members were at risk because South Africa only printed currency for its own use to avoid the risk of over-circulation, which could lead to deflationary pressures on its economy.
Mlambo said, even within the RMU, the circulation of the rand was limited as the other three member states insisted on using it alongside their local currencies. He said personally, he would have been happier if Zimbabwe had adopted any other currency, but not the dollar, as legal tender in 2009.
Among other disadvantages, he said the continued firming of dollar against other currencies had continuously eroded the market competitiveness of local products. Zimbabwe adopted a slew of currencies which included the dollar, British Pound, Australian dollar, the rand and the Botswana Pula as trading currencies in 2009 in a bid to dig the economy out of a decade long melt-down.
Government efforts to revive the economy have stalled since then, owing to lack of productivity and a persistent liquidity crunch blamed on the country’s lack of credit-worthiness and economic policies blamed for scaring away potential investors.
Meanwhile the European Union Head of Delegation Philippe Van Damme says Zimbabwe needs to address policy inconsistencies and eliminate corruption to unlock funding.
“The reforms have to be done in the interests of the people of this country. Look into Lima agenda, clarify indigenisation policy and sort out the land outstanding issues because security of land is security of investment, collateral to access bank funding and so forth…and it’s obvious what a domestic or international investor needs is a secure and predictable legal framework,” Van Damme told jounralists in Harare.
“We insist policy reforms because these reforms will help government grow out of its problems.”
Zimbabwe missed a self-imposed June 30 deadline to repay $1,8 billion in arrears owed to the World Bank, International Monetary Fund and African Development Bank. The multilateral lenders have emphasized on payment of the arrears as a prerequisite for any possible future funding.
Corruption has become endemic in Zimbabwe, and the country is losing at least $1 billion annually to the vice, with public officials, police and local government officials among the worst offenders, according to a recent report by watchdog Transparency International.
“It’s clear from all perspectives that as long as there are huge volumes of corruption it’s difficult to imagine that we will inject money in the economy. We are not injecting money in an economy which is leaking,” said Van Damme.