Harare, Zimbabwe (News of the South)-The South African Rand provides the only viable currency alternative to the present economic scenario and should be adopted, according to a senior consultant in the Office of the President and Cabinet.
Speaking at a review meeting of the first 100 days of the Bond notes, Professor Ashok Chakravarti, a member of the Ease of Doing Business Task Force in the Office of the President and Cabinet, spelled out the grim deficiencies of both bond notes and the US dollar.
‘The whole problem is in the use of the US dollar and the use of the bond notes is actually secondary”.
“No country in the whole world has successfully used the US dollar over a long period with success without a close relationship with the US banking system which is fundamental, maybe only 2 or 3 have done that”.
Chakravarti said it was now nearly ten years and results have shown that it has not been good using the US dollar which has actually become an impediment to growth.
“The problem is that we are a dollarized economy in the middle of a non-dollarised world and yet we don’t have the capacity to generate foreign currency whilst we also have become a source of dollars for the rest of the world”, he said.
“We don’t have the best conditions to introduce our own currency so the best option that we have is to adopt the Rand which can’t be externalized since it is a weak currency against the US”
The Prof said the country would not face the problem of externalization, which has seen $100 and $50 dollar denominations disappearing locally, if the Rand is adopted.
“It’s good to have a weak currency in the situation that we have today as it allows us to be competitive unlike presently where we are using a stronger US against a weak Rand with which we expect to compete”
He said the 60% trade that Zimbabwe has with SA also boded well with the adoption.
“Statutory 64 won’t be able to save the local industry from the SA products so if we can’t fight them lets join them” he said.
Chakravarti who is a respect economist also bemoaned the current liquidity crisis which he says needs something other than an injection of more bond notes.
“We need a 15 percent ratio between deposits and hard cash, however we have a situation where the amount of hard cash has been declining because currently we have $2,6 billion in deposits which requires $900 million in hard cash so that we don’t have a liquidity crisis but we only have about 420 million”
Chakravarti said even if another $100 million in bond notes was brought in it would not suffice as it would be still below the required $900 million.
The RBZ has since vowed to continue bringing in more bond notes until it has exhausted the $200 million Afreximbank facility it got though the denominations won’t go past the $5 note.
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