The Reserve Bank of Zimbabwe (RBZ) has ruled out the adoption of the South African rand, or joining the sub-regional Rand Monetary Union (RMU), citing the volatility of the currency.
Addressing a National Economic Consultative Forum (NECF) meeting in the capital Harare on Thursday, RBZ deputy governor, Dr Khuphukile Mlambo, said while the US dollar was not an ideal currency on account of the numerous “headaches” that came with it, adopting the South African Rand carried more risks.
“We need to understand that the South African Rand has its own challenges: it is volatile,” Dr Mlambo said.
He pointed out that while joining the RMU, which is made up of Namibia, Lesotho, Swaziland and SA itself, seemed attractive as an option to enhance business competitiveness, the members were at risk because South Africa only printed currency for its own use to avoid the risk of over-circulation which could lead to deflationary pressures on its economy.
Mlambo said even within the RMU, the circulation of the rand was limited as the other three member states insisted on using it alongside their local currencies.
He said personally, he would have been happier if Zimbabwe had adopted any other currency, but not the USD, as legal tender in 2009. Among other disadvantages, he said the continued firming of USD against other currencies had continuously eroded the market competitiveness of local products.
Zimbabwe adopted a basket of currencies which included the USD, British Pound, Australian dollar, the ZAR and the Botswana Pula as trading currencies in 2009 in a bid to dig the economy out of a decade long melt-down.
Government efforts to revive the economy have stalled since then, owing to lack of productivity and a persistent liquidity crunch blamed on the country’s lack of credit-worthiness and economic policies blamed for scaring away potential investors.
