Reserve Bank of Zimbabwe (RBZ) Governor, John Mangudya, has said Zimbabwe should never have completely dollarised its economy in 2009 as this is now making it difficult for ordinary people to accept their own local currency.
The Zimbabwe dollar was reintroduced in 2019 but ordinary people have no confidence in it and prefer using the US dollar as the store of value.
Mangudya said the Zimdollar should have been given a chance to regain its value alongside other currencies, instead of completely dumping it when the multi-currency system was introduced in 2009.
Speaking during a public lecture at Manicaland State University of Applied Sciences last Friday, Mangudya said:
In Zimbabwe, we made one fundamental mistake of throwing away our currency in 2009. We were supposed to keep it and allow it to limp alongside other currencies.
We should not have locked it out through a Statutory Instrument, saying don’t come back again, don’t resurrect. That is where we made a mistake.
At one time the metical was useless in Mozambique, but they never threw it away. In Russia and Zambia, the same happened and when their economies began to pick up, their currencies regained value, but here we put it six feet under and therefore it is now very difficult for people to accept the local currency.
The irony in Zimbabwe is that big companies were the first to call for the use of local currency because they know that will make them more competitive on the global market, but the ordinary men and women on the streets are clamouring for a re-dollarisation of the economy.
Mangudya said the country will continue using the Zimdollar alongside other currencies until people had confidence in the local currency. He said:
Countries that would have completely dollarised cannot just wake up with a mono-currency, otherwise, their economies will collapse.
There is something called histolysis, meaning that people still want to hold on to the past.
We need to introduce a mono-currency gradually. We tried it in 2019 on June 24 and inflation spiked to 87 per cent.
People need to have more trust and confidence in the local currency. We will continue having a partially dollarised economy.
It should also be noted that there is no country without a parallel exchange rate.
However, this should be manageable, between 10 and 20 per cent of the actual rate.
Mangudya said for the country to achieve economic stability, there is a need to produce more and more thereby reducing the import bill.