Mainstream use of local currency: Eddie Cross

ZIMBABWE should come up with a monetary policy framework that weans it from dollarisation and mainstream use of the local currency for domestic transactions, prominent economist Mr Eddie Cross has said.

This comes at a time when the country is battling exchange rate volatility, which has seen the United States dollar becoming a preferred legal tender due to its stable store of value function.

Discussing the issue during the inaugural National Economic Policy Dialogue Session organised by the Zimbabwe Institute of Strategic Thinking (ZIST) in Victoria Falls last week, business leaders said despite the right fundamentals put in place by the Government, ensuring currency stability must be urgently addressed.

Mr Cross, a prominent businessman and former Reserve Bank of Zimbabwe monetary policy committee member, said Zimbabwe should learn from neighbouring countries Malawi, Mozambique, South Africa, and Zambia that have promoted the use of their local currencies, which now have significant value against other currencies.

Reserve Bank of Zimbabwe (RBZ)

He said dollarising the economy was not the best option and criticised the foreign currency auction system for failing to sustain demand from the market. Instead, Mr Cross implored the Government to adopt a free market-based approach to address the exchange rate.

“The measures being adopted by Government are not going to change the situation significantly and we will continue to see the depreciation of the local currency until such a time when the Government gets it right,” he said.

“The fundamentals are straightforward and I agree with Government but we have to adopt a market-based approach in a real market situation.

“I think we should adopt our own currency as the sole means of exchange for domestic transactions to stabilise the situation.

“The economy is growing, exports are growing and jobs are being created but the present situation can be resolved quickly by making a few things right.”

Regarding the lack of confidence in the local currency by Zimbabweans, Mr Cross said this can be restored if the Government makes the local currency the sole legal tender for all local transactions.

Zimbabwe adopted the multi-currency system in 2009 in response to hyperinflation and abolished its position in 2019 when it re-introduced the local currency. The country is now back to the multi-currency system, which Government said was for a short period, at least up to 2025.

Mr Eddie Cross

In order to maintain stability, Mr Cross also challenged the Central Bank to limit money supply growth saying this was creating unnecessary pressure on the economy thereby causing inflation.

“We’ve got to stop printing money and create a market for foreign exchange, which is genuinely free and where the market sets the price based on supply and demand,” he said.

“This economy is growing but we need to fix one element in our policies and if we do so things will improve. We have to do like Zambia and Mozambique.” — chronicle