Zimbabwe’s decision to introduce the multi-currency system 10 years ago is now haunting the economy, several months after the government banned the use of foreign currency in domestic transactions.
An economic analyst, Persistence Gwanyanya, said the informal sector totally ignored SI 142 as it continues to trade using multi-currencies. He said:
Even those who complied are largely referencing or indexing their prices to the United States dollar, all of which deny the country the opportunity to benefit from using a sovereign currency.
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A normal economy should reference its prices to itself. In this economy, prices are a function of its demand and supply factors, not just US dollar exchange rate movements.
Zimbabwe has therefore failed to accrue the benefits of using a sovereign currency while neighbouring countries such as South Africa, Zambia and Botswana are benefitting.
In a normal economy, when a country has a sovereign currency, it is able to sell its products cheaper, both locally and internationally. However, in Zimbabwe, money itself is sold.