Finance and Economic Development Minister, Mthuli Ncube, said that it would be economically suicidal if Zimbabwe adopts the United States dollar as the only currency.
Ncube argued that full dollarisation will result in the destruction of the banking sector and local industry will no longer be competitive, among other other things. Said Ncube:
This is what will happen on day one if you adopt the United States dollar as the only currency, something nasty is going to happen.
Four things as a minimum will happen. You will wipe out the entire banking sector.
Because you need to convert their Zimbabwe dollar balances into US dollars, banks will have negative balances. You will have a crisis; you will have no banking sector.
Secondly, very quickly you will have a cash crisis because you cannot print US dollars and there will be a divisibility problem; the small denomination notes will be in short supply and you will start to have cash queues in the banking sector.
The advantage of having a domestic currency circulating with the US dollar is we will have to manage the cash crisis. We have been through this before.
If you remember we had to create something called the bond notes but that was before I arrived, in order to deal with some of the cash crisis.
Also, you will do away with the monetary policy. You need both fiscal and monetary policy or you will be walking with one leg.
So something nasty will happen if you just use the United States dollar.
Ncube said the manufacturing sector will lose its competitiveness if the domestic currency is done away with and the country will be inundated with imports.
On constant fuel price increases, Ncube said the price of petrol would be much higher if the country was not blending with ethanol.