ZIMBABWE should re-introduce its own currency backed by commodities since bond notes and dollarisation has failed, financial expert Persistence Gwanyanya has said.
Speaking during the CEO Africa Roundtable discussion in Bulawayo on Friday, Gwanyanya said the government needed to go back to the drawing board and come up with a permanent solution to the country’s cash crisis.
BY MTHANDAZO NYONI
“I know some of you are not very comfortable with this proposition, but this would be the best proposition for the country going forward.”
Zimbabwe dumped its own currency in 2009 for a multicurrency regime after the local unit was rendered useless by hyperinflation.
The United States dollar proved to be the overwhelmingly popular choice and has become the de facto currency in use.
Gwanyanya said policymakers, while they agree on the notion of re-introduction of local currency, always insist that fundamentals were not yet right.
“My question would always be who makes these fundamentals? If you assess that fundamentals need to be right and you are doing nothing about getting those fundamentals right, then you may as well not think about de-dollarising, in at least for any foreseeable future,” he said.
“There is, therefore, a need for policymakers to think outside the box and create the fundamentals and re-introduce our own currency and as well as sustain this currency.”
The plan, Gwanyanya said, would be executed through the forward sale of commodities to other countries.
“It is easy to forward sale our gold production at $2 billion a year. If we forward sale it for five years, we get $10 billion, our tobacco production at $1 billion a year and if we forward sale it we get $5 billion. The same can be done to platinum.”
Speaking at the same event, Finance deputy minister Terence Mukupe concurred with Gwanyanya, saying the country needed to adopt its national currency.
“We have to adopt a national currency without doubt and there has to be a cap on the maximum release of how much of the new currency you are going to put out. The numbers that are there right now are indicating that probably the maximum release should not be more than a billion dollars,” he
“I know guys in my office always say that if we are to release $500 million every month for two straight months, the foreign currency should go away. But for me, releasing a billion USD is a temporal measure, but when that is your national currency, that will work. It then becomes an issue of what are backing your currency with,” he said.
In 2009, then central bank governor Gideon Gono proposed the return of the local currency backed by minerals.
The move was shot down by former Finance minister Tendai Biti and economists.
Gwanyanya told NewsDay yesterday that the world was moving into commodity-backed money in the aftermath of the global financial crisis which has ushered a new thinking to base money on commodities, especially gold.
“That is the reason you see countries such as Russia, China and the US, they are accumulating gold at very a significant pace because the only way you can strengthen your currency is through linking it to a certain value, say of a commodity. So the commodity-backed currency is the new thinking of advanced economies at the moment, reading from the challenges that we experienced after the global financial crisis with the fiat money which is as good as the confidence that it is backed on but it lost value and crumbled,” he said.