Zim won’t adopt rand: Re­serve Bank

Chronicle (Zimbabwe) - - Business Chronicle -

THE Re­serve Bank of Zim­babwe (RBZ) has put paid to spec­u­la­tion that Zim­babwe could adopt the South African rand de­spite the chal­lenges in util­is­ing the mul­ti­c­ur­rency sys­tem that is dom­i­nated by the United States dol­lar.

Some lo­cal eco­nomic ob­servers have sug­gested that Zim­babwe could ben­e­fit from join­ing the rand mone­tary union in so far as South Africa is al­ready Zim­babwe’s ma­jor trad­ing part­ner, ac­count­ing for around 60 per­cent of the lat­ter’s im­ports.

The union com­prises South Africa, Le­sotho, Swazi­land and Namibia. Th­ese an­a­lysts also say adopt­ing the weaker rand (compared to the US dol­lar) will help lo­cal in­dus­tries re­duce their costs of pro­duc­tion.

RBZ deputy gover­nor Dr Kupuk­ile Mlambo, how­ever, said yes­ter­day that there are sig­nif­i­cant tech­ni­cal­i­ties that need to be over­come for adop­tion of the rand to be­come a dis­tinct pos­si­bil­ity.

“Per­tain­ing to the adop­tion of the rand, we need to un­der­stand a cou­ple of things. One of the things is that you can­not be a mem­ber of the com­mon mone­tary area or rand mone­tary area un­less you have your own cur­rency. So we don’t have a cur­rency.

“Why (a lo­cal cur­rency is es­sen­tial)? Be­cause South Africa prints the rand for the South African mar­ket. Their fear is that if they print for the re­gion they have no way of stop­ping those rands from com­ing back into South Africa and be­come in­fla­tion­ary. And that is why Swazi­land, Le­sotho and Namibia have along­side the rand their own cur­ren­cies,” he said.

Zim­bab­wean au­thor­i­ties have al­ready said re­turn of the Zim­bab­wean dol­lar will not hap­pen any­time soon the macro-eco­nomic fun­da­men­tals are not right.

Dr Neb­son Mupunga, a prin­ci­pal di­rec­tor in the cen­tral bank’s Ex­ter­nal Sector Eco­nomic Re­search Divi­sion weighed in and said the real chal­lenge that Zim­babwe cur­rently faces is not one of cur­rency, but pro­duc­tion.

“Whether we adopt the rand, whether we adopt the yuan or the Botswana pula and so on, to me our chal­lenge in this econ­omy is not a cur­rency issue, but our chal­lenge is a pro­duc­tion is­sues.

“So even if we adopt the rand and we are not pro­duc­ing, it doesn’t mean that South Africa will print the rand for us, we still need to earn the rand in the same way that we are earn­ing the United States dol­lar, so it may not be a so­lu­tion to our cur­rent chal­lenges,” said Dr Mupunga.

“We need to pro­duce, we need to in­crease pro­duc­tion.”

Mean­while, the rand has shown it­self to be a rather un­sta­ble cur­rency. As at present, the rand has been weak­en­ing af­ter fraud charges were yes­ter­day laid on against South African Fi­nance Min­is­ter Pravin Gord­han. By mid-morn­ing the rand was at R14,3405 to the dol­lar from yes­ter­day’s R14,2307. And long-term pro­jec­tions for the rand are not too bright ei­ther. Lo­cal economist Joseph Mverecha says with the US Fed­eral Re­serve likely to keep tight­en­ing in­ter­est rates go­ing for­ward, this should push the Rand even weaker against the US dol­lar. — BH24

Dr Kupuk­ile Mlambo

Newspapers in English

Newspapers from Zimbabwe

© PressReader. All rights reserved.