An economist speaking during the State of the Economy National Dialogue today in Harare said that the Zimbabwean market has been re – dollarizing (use of United States Dollars) as the local currency fails to effectively function as money. Money plays four functions which include being the store of value, unit of account, medium of exchange and standard for deferred payments according to economist Dr. Godfrey Kanyenze.
The economist said when the Zimbabwean Dollar was introduced in June last year, inflation was already 176% and the local currency was no longer able to do what it was supposed to do.
“You go anywhere now, even those that are charging rentals, even the real estate agency, they just put it (local currency) for legal purposes but they are also juxtaposing,” Kanyenze said.
“So right now people are not running away from the Zimbabwean Dollar because it’s called the Zimbabwean Dollar, it’s because of what defines it, what it can do or not do.”
Besides the market dictating currency of use, the government introduced exemptions in the use of foreign currency has led to some groups of people not even experiencing the use of local currency according to the economist. Exporters, fuel dealers, and workers in non-governmental organizations were exempted from the use of USD.
Redollarisation can also be led by the minimum capital requirements for the banking sector which are reviewed to local currency equivalent in USD causing contradictions according to Kanyenze.
The other causes of re – dollarisation in Zimbabwe include a multiplicity of statutory instruments and shortage of cash and smaller denominations also he other causes of re – dollarisation in Zimbabwe include a
The economist referring to the Zimbabwean Dollar said no one would want to hold to a currency that cannot hedge or protect wealth.
Kanyenze, however, said that there is nothing wrong with a country having its own currency but the move goes with responsibility.
“There is a sovereign responsibility,” he said. “You have to ensure that it’s (the local currency) stable, you have to ensure that it has got value. you have to ensure that it allows your business to be competitive.”