University of Zimbabwe economics professor and Senior Advisor of the Strategic Economic Research Program Professor Ashok Chakravarti has advised the government to either adopt the South African Rand or to reintroduce the Zimbabwean dollar. Chakravarti argued that the foreign currency crisis and the cash crisis could not be resolved while using United States dollars.
Speaking at a post-budget seminar for MPs, Chakravarti said:
We cannot have a new economic order sustained by someone else’s currency, and so we need our own currency, and there are two solutions to it of which one is to adopt the currency of our main trading partner, which in our case is South Africa, and adopt the rand informally in the same way we adopted the US dollar in 2009.
The second solution is to have our own currency, and the question will be how do we maintain the value of the Zimbabwean dollar? My proposal is that we release a Diaspora bond of $1 billion, which can back the new Zimbabwean currency.
However, this view was opposed by economist Gift who argued that the Zimbabwean dollar would crash if it was introduced. Said Mugano
We cannot introduce our own currency. The proposals by Chakravarti are very sound from a mathematical point of view, but it is the same mathematical equation done by the Reserve Bank of Zimbabwe, which brought in $200 million bond notes which they said were equivalent to US dollars, but it all went in tatters. If we bring the Zimbabwean dollar, it will crash overnight like the bond note.
More: NewsDay
I think we should adopt the rand formally by negotiating with South Africa for aperiod of 10 years while we build our reserves. If South Africa agrees then we can ask for a data base of the prices of their goods and services and apply those prices. We will discover how ridiculously high our goods and services are, an in some cases things in Zim are priced 19 times higher than in RSA. Any one who charges anything above the price in RSA will be required to justify or face sanctions of some form. The problem with prices in Zimbabwe is we undervalued the USD a dollarisation and now some people in high offices are enjoying themselves through illicit means as we can see by the current wave of ZACC prosecutions, but the masses are suffering. We mid-wifed South Africa’s political independence and is not too much to ask them to intercess in our economic turn-around. Otherwise these peice-meal inetrventions we are doing does not solve the real issue, which is the under-valuing of the USD.
10 times higher not 19 times
This topic is the realm of cross border traders, street kids and street vendor. Ask them and they know the right solutions. Do not take us back to pre-2008.
Comrade Chirikure and comrade Tiki are partly correct, subject to idea improvement. I agree with them somehow. Let us look at causes of inflation: Briefly; shortages of commodities worsens the rate of inflation in any economy. That’s how our own currency ended up useless hence turning to USD, Rand etc. The closest currency to our economy supporting our business is the SA Rand. Its historic and a fact that our ZIM dollar used to be stronger than ZA RAND; BUT GRADUALLY weakened due to our own economic flaws. Effective business on daily basis is between the two economies such that alluding to the idea of officially using the rand will not affect us in the short run, while we work hard to stabilize our own economy. The idea of rooting out corruption will quicken the stability of the economy and eventually reintroduce our currency gradually. Our economic recovery is not far as over exaggerated by fear of the unknown. It is on its rapid recovery as long as corruption is routed out. Lets be in the hope of tomorrow with the wake of today and allow productivity in every respect. Its productivity that stabilizes the economy in the absence of corruption. Corruption is like ‘eating the seed’ [kudya mbeu wobva washaya chokudzvara], i.e. destroying the future. If we work towards it, the future is bright. ‘Humbimbindoga hunopisisa jira’.