ED speaks on local currency

Samuel Kadungure recently in LUSAKA, Zambia
GOVERNMENT is working around the clock to address key macro-economic fundamentals, which will pave way for the introduction of a currency that is not collapsible, President Emmerson Mnangagwa has said.

Responding to questions during his working visit to Zambia, Cde Mnangagwa said Zimbabwe had a lot of work to do before introducing a local currency.

“No. Not the one, which collapses. No,” he said.

“We will not bring back the collapsible currency. The Minister of Finance and Economic Development can articulate that very clearly. In December, 2008, the then President formed a committee of five, and I was one of them, plus (Cde) Chinamasa and three others. We decided to have a basket of currencies. Initially, the predominant ones in that basket were the South African rand and the American dollar, but down the line the American dollar became more dominant and the rest disappeared.

“There are fundamentals that are required before introduction of the currency. It is necessary that we have a currency of our own because we do not print the Rand, we do not print the US dollar, or the Pound, or the Euro, the Pula or Kwacha. Yes, we need our own currency, but on what basis, and what are the fundamentals,” said President Mnangagwa before calling Minister Chinamasa to explain what the country was doing to address the matter.

Cde Chinamasa said the country was in the Guinness Book of Records for the world’s highest inflation, and investors were scrambling to buy souvenirs of the demonetised currency.

“It is our view that we need to correct our macro-economic fundamentals before introducing our own currency. We need to address the issue of our budget deficit. At the moment more than 90 percent of our revenue is going towards wages, and none towards infrastructure, yet we all know that infrastructure is key and the foundation to our economic take-off as a country.

“So we need to change the structure of our budget, we need to address the issue of budget deficit. The other fundamental we need to address is being able to build reserves, import cover; at least six months import cover.

“Currently it’s at 0.7 month import cover and we need to build gradually reserves that will take care of important imports, that is, machinery, raw materials, fuel, fertilizers and so on.

“The other issue we also have to address is trade imbalance — at the moment we are importing more than we are exporting, certainly on paper. I say on paper because the imports suggest that they are paid cash and that cash is ours, but is not coming through the normal channels, and we also are importing trinkets, which are not necessarily important for our economic development.

“So we have to address that question so that we have a trade balance, which is not as it is currently. We also have to address the issue of foreign investment, as we all know our investment levels are very low. Last year maybe we attracted $300 million investment when Zambia is attracting between $3 and $4 billion, Mozambique is the same, so, which is why the strategy by President Mnangagwa is to engage the world both economically and politically. We need to improve and connect politically; we need to normalise our political relations.

“The key to the normalisation of our relations is the United Kingdom because it was in the first place the source of much of our difficulties. The impasse that grew between us was basically arising from the resolution of the land question. We also need to address the issue of clearance of our debts, which are making it difficult for us to access international capital. We are unable to access lines of credit from the international community.

“When we compared notes with my counterpart here (Zambia Finance Minister), Zambia has gone into the market looking for $3 billion, and the request is over subscribed and they want to lend him $7 billion. In my case I cannot even borrow a dollar.

So those are the issues we are going to address and I am happy to say that with the new political dispensation, and the bridges that His Excellency (President Mnagagwa) is building with our erstwhile friends or countries, which had hostilities against Zimbabwe, and we hope that when those bridges are built, we should get back into the global economy and put these problems behind us. So we are optimistic about the future, it is only then in my view that we will consider introducing a local currency. I want to think it will be soon,” said Cde Chinamasa.