By Staff Writer
RESERVE Bank of Zimbabwe (RBZ) has regretted the suspension of the Zim$ at the height of the dollarisation era in 2009 saying such a strategy lacks the spine to spur economic growth.
Presenting the first 2022 Monetary Policy Statement (MPS) Monday, RBZ governor John Mangudya defended the decision to sustain efforts around stabilising the Zim$ saying he was drawing lessons from the errors of dollarisation.
“The past experience of the country is quite instructive that promotion of use of local currency is beneficial. In 2009 the country legislated a fixed exchange rate under the auspices of dollarisation. Electronic or virtual currency was commingling with physical foreign currency and the two were at par.
“With hindsight, what was supposed to have been done then was to allow the local currency to be part of the basket of currencies as evidence on the ground shows that the country did not have sufficient foreign exchange liquidity to meet its foreign currency commitments even under dollarisation,” he said.
The central bank governor said legislation of a fixed exchange rate, as was the case in 2009 when the US$ was introduced as the currency of transaction, is not ideal for any economy as it renders the economy uncompetitive and a supermarket economy and gives the wrong impression that foreign currency is a domestic currency which is earned without exporting.
He however said the current system in the country, where local currency, the Zimbabwe dollar, is used as a functional currency together with foreign currencies for payment for goods and services is ideal for promoting growth and competitiveness of the economy.
“This has helped the economy to grow by 7,8% in 2021 following the increased local currency backed aggregate demand that was necessitated by increased agricultural output and expansion in Government infrastructural projects,” he said.