Zimbabwe Finance Minister Mthuli Ncube has told Parliament that he is aware that the country is slowly re-dollarising but he reiterated that there is no going back on the local currency.
Instead, the country will soon be introducing bigger denomination notes.
He had been asked by Hatfield legislator Tapiwa Mashakada how he was going to “vaccinate against the re-dollarising of the economy” which was now a reality.
Mashakada, a member of the opposition Movement for Democratic Change, was Economic Planning Minister during the inclusive government which ran the country between 2009 and 2013.
“My question is – Minister, I see you are introducing higher denominations of bond notes which is a signal that there is no going back on the use of the domestic currency,” he said on Wednesday.
“What is your attitude to the re-dollarisation of the economy? People are re-dollarising, retailers are re-dollarising, everyone. The real estate sectors are re-dollarising. People are charging US dollars. If you search Hon. Members pockets, they have got US dollars and not bond notes. How do you vaccinate against the re-dollarisation of the economy which is now a reality?” he asked.
Ncube said he was aware of what was happening but there would be no reverse on the mono currency.
“We are aware of what is going on. Of course, it is illegal, they must desist from doing it. Also, we are aware of the other conundrum which is the speed of injection of Zimbabwe dollars into the economy,” he said.
“The speed is governed by our prudence that we should not flood the economy with the Zimbabwe dollar cash. We have to be prudent; we have to exchange RTGs dollar for the new Zimbabwe dollar so that we keep the amount of money in circulation the same.
“We do not want an excessive growth in money supply which will then cause currency volatility and push up inflation. So that prudence makes us to do things carefully and slowly but in the meantime the economy still needs cash.
“We can understand what is going on … but we are determined that we have to enforce the mono currency in terms of transactions. We also recognise that we are in transition and that transition will take time but we are injecting the domestic cash to make sure that transition can be speeded up.”
Zimbabwe re-introduced its local currency last year after a decade of using a basket of multi-currencies but while the South African rand initially dominated the market, the United States dollar soon took over.
MDC members including former Finance Minister Tendai Biti are for re-dollarisation but Ncube argues that there is no way the country’s economy can recover and grow using the US dollar because it is not competitive.
Ncube is, however, fighting a tough battle because of a skeptical public that has no confidence in the current administration and the local currency.
The public has every right to be pessimistic because some have lost the bulk of their savings, if not their entire savings, twice within 10 years.
Yesterday the social media was rife with reports that the Reserve Bank of Zimbabwe would liberalise the interbank rate with some reports saying the local currency which is currently trading at about 18:1 would fall to 35: 1 today.
The Old Mutual Implied Rate, used mostly by investors, in fact plunged to 42:1.
OMIR is the difference in price of the Old Mutual stock price on the London ad Harare stock exchanges.
The RBZ, dismissed the reports, saying the disinformation was meant to destabilize the exchange rate.
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