‘Local currency will be defended’
THE Zimbabwe dollar will continue to be promoted and defended as it is crucial in boosting the operations of some companies, especially in the cooking oil sector, Finance, Economic Development and Investment Promotion Minister Professor Mthuli Ncube has said.
Responding to questions from journalists on the sidelines of the 56th session of the United Nations Economic Commission for Africa conference of African Ministers of Finance, Planning and Economic Development underway here, Prof Ncube said the Government was committed to protecting the local currency despite its low circulation levels due to inflation.
Presently, some economists say the local currency accounts for 20 percent of transactions while the US dollar accounts for 80 percent, and have made a strong call for the removal of the domestic currency.
Said Prof Ncube: “We have a domestic currency and we have every duty to protect it, to promote it.
“It allows us to conduct proper Monetary Policy. We need all the tools for macro-economic management. So clearly, we must support that local currency.
“In our policies that we will announce, there will be policies to promote the use of the domestic currency. That is a constant, it (the Zimbabwe dollar) will always be there.”
Some companies, mainly in the coal and agriculture sectors, previously raised concerns that using the US dollar as a transaction currency increased their operational costs and made their products uncompetitive in export markets.
Prof Ncube conceded that some sections of the private sector significantly benefited from the use of the local currency.
“Those are the facts because they have been able to do wage compression, which has allowed their overall margins to increase on the back of lower real wages.
“That is what the numbers are telling us. They (some companies) have been able to improve their competitiveness. So, the domestic currency has benefited some parts of the economy, especially our manufacturers.
“I have seen how competitive the cooking oil sector has become. It is almost a direct product of our currency reforms since 2019. We didn’t have a strong sector back then but we now have five or six players in the market and they are very competitive,” said Prof Ncube.
When the Government opened up the borders to allow the importation of more basic goods when retailers were inexplicably increasing prices, fewer bottles of cooking oil came into the country as prices remained competitive.
Prof Ncube said local cooking oil producers have become “very competitive” due to deliberate policies around currency reforms.
“I am just picking that one sector to show you the benefits of having a domestic currency. I am not saying it is the only sector that has been supported.
“So, it is very critical to always maintain a domestic currency regardless of whether the circulation is at 10 percent or 100 percent; it must always be there, and it must always be supported.
“But what is critical is that it must be stable and once it is stable, it gives stability to everything and it becomes a store of value, rather than just a transactional currency,” said Prof Ncube.
Turning to the anticipated Monetary Policy Statement, Prof Ncube said it would be presented “in the fullness of time”.
“We said that we will issue the Monetary Policy (Statement) through the Reserve Bank of Zimbabwe in the fullness of time, which will try to deepen this agenda for macro-economic stability via currency stability first, then stability of prices thereof then overall, macro-economic stability.
“So, please be patient, the Monetary Policy Statement is on the way, once certain issues are aligned. You know the timing of change of policies is critical,” he said.
Prof Ncube said President Mnangagwa issued a statement on the economy’s direction of travel, and explained that the direction is “really a question of stability, then the pillars to support that is what will be announced in the Monetary Policy Statement”.