Join­ing rand union ‘dan­ger­ous’

Chronicle (Zimbabwe) - - Business Chronicle - Bianca Mlilo

RE­SERVE Bank of Zimbabwe (RBZ) gover­nor Dr John Man­gudya has warned that join­ing the Rand Mone­tary Union at the mo­ment could worsen the eco­nomic sit­u­a­tion as the coun­try does not meet the rec­om­mended con­di­tions for its adop­tion. There have been in­creased calls by bankers, in­dus­try and com­merce for Zimbabwe to adopt the rand as its main cur­rency in­stead of the United States dol­lar.

In view of the firm­ing US$ against re­gional cur­ren­cies and the as­so­ci­ated ef­fect on pro­duc­tion costs, wors­en­ing cash short­ages and de­ple­tion of nos­tro re­serves, the RBZ has been cor­nered to adopt the rand as the of­fi­cial cur­rency to re­duce con­cen­tra­tion risk as­so­ci­ated with the strong dol­lar.

Zimbabwe has been us­ing the US dol­lar as its main medium of ex­change since 2009 along­side other cur­ren­cies in the mul­ti­ple-cur­rency sys­tem.

Of late sur­veys in­di­cate the US dol­lar now ac­counts for 95 per­cent of all trans­ac­tions in the coun­try fol­low­ing the weak­en­ing of the rand whose cir­cu­la­tion has di­min­ished to about five per­cent, ac­cord­ing to RBZ.

Re­spond­ing to the is­sue in an in­ter­view yes­ter­day, Dr Man­gudya said the fun­da­men­tals as­so­ci­ated with the adop­tion of the rand as a for­mal cur­rency were not right.

He ex­plained that the Rand Mone­tary Union de­manded that the coun­try seek­ing ad­mit­tance have its own cur­rency, which Zimbabwe lacks.

“The rand is­sue is very sim­ple. We could have joined the Rand Mone­tary Union or the Sacu (South­ern Africa Com­mon Union) in 2009 but there are cer­tain cri­te­ria to do­ing that, which is why we are us­ing a multi-cur­rency sys­tem and not a sin­gle cur­rency,” said Dr Man­gudya.

“What you are ask­ing for is very dan­ger­ous be­cause we might go into a worse sit­u­a­tion. You can­not have a rand zone with­out your own cur­rency, and our time is not now.

“South Africa can­not sup­ply the whole re­gion with a cur­rency. This is why we are in­tro­duc­ing the bond notes which are a re­straint mea­sure meant to in­cen­tivise ex­ports.”

The RBZ is al­ready rolling out a mas­sive public aware­ness cam­paign to clar­ify the use of bond notes and their ben­e­fits to the econ­omy.

This fol­lows neg­a­tive per­cep­tion and mis­un­der­stand­ing of the con­cept, which some mis­took for the re­turn of the dreaded Zim­bab­wean dol­lar via the back­door.

The Gov­ern­ment has as­sured the public that the mul­ti­ple cur­rency sys­tem is here to stay and that print­ing of bond notes will only be lim­ited to a $200 mil­lion value, which will not cause in­fla­tion. Dr Man­gudya em­pha­sised that although the South African rand was le­gal ten­der in many coun­tries, the dif­fer­ence was that other mem­ber states is­sued their own cur­ren­cies, which are the Le­sotho loti, Namib­ian dol­lar and Swazi’s lilan­geni. These cur­ren­cies are ex­changed at par with the rand.

Ex­perts say Zimbabwe can­not just walk into the Rand Mone­tary Union with­out fac­ing mon­u­men­tal le­gal chal­lenges.

It is also im­pos­si­ble for the coun­try to uni­lat­er­ally adopt the rand with­out in­fring­ing on the agree­ment that binds the Rand Union mem­ber States as ap­pended to a 1974 pact signed as the ba­sis for the for­ma­tion of the Com­mon Market Area (CMA) agree­ment. - @Bian­caMlilo

Dr John Man­gudya

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