Zimbabwe rejects rand, clings to troubled multi-currency

By Tatenda Dewa | Harare Bureau |

Finance minister, Patrick Chinamasa, has dismissed calls for Zimbabwe to adopt the South African rand as its sole official currency so as to curb the current cash crisis.

The call for randification has emerged from various circles as the country battles to contain a cash crunch that emerged in April and has forced banks to severely limit withdrawals.

Presenting a ministerial statement on the state of the economy on Thursday, Chinamasa said, despite the calls, Zimbabwe would stick to a basket of currencies that include the greenback, rand, Botswana pula, the Euro and Chinese yuan.

The country adopted a multi-currency system in early 2009 following a period of hyperinflation that rendered the local currency useless.

At that stage, the use of the American dollar and the rand, according to Chinamasa, was almost at par, but the former now dominates.

The South African rand has gone through a troubled patch, resulting in Zimbabweans rejecting it.

The dominance of the US dollar has brought along numerous headaches as Zimbabwe cannot determine its inflows at a time foreign currency generation is severely constrained by low productivity.

“There have been calls for the adoption of the South African rand as the transacting currency by many people. The rand remains part and parcel of the multi-currency system and economic players are free to switch to any currency as a way of managing their operations.

“We do not intend to adopt a single currency, but we will continue to bolster the strength of the multi-currency system,” said Chinamasa.

Government recently announced its intention to introduce bond notes to ease the current cash squeeze, but this has been met with widespread skepticism as many view it as a backdoor strategy to re-introduce the local currency.

Chinamasa, however, said the notes would not be imposed on anyone.

“It is also important to note that bond notes will not be forced to people who don’t like them especially if you are not an exporter. It does not mark the return of the Zimbabwe dollar because key fundamentals are not yet present.

“The issuance of bond notes has self control mechanism in that where there are no exports there are no bond notes. In other words the bond notes are issued relative to the volume of exports.

“The bond notes will be gradually be released into the economy in sympathy with export receipts through a normal banking channel up a maximum ceiling of the facility of $200 million,” said Chinamasa.

Adoption of the rand would entail seeking official authorisation from the South African central bank but there is no need to be granted authority for the use of the greenback, which is an international reserve currency. Nehanda Radio