Opinion: It’s Not Yet Time For The Zimbabwean Dollar To Make A Comeback

Written by Kevin Mwanza

Oct 13, 2014

On the back of news that foreign investment into Zimbabwe fell 59% to a mere $67 million in the first half of this year, it has become a moot point that Zimbabwe needs to urgently create an environment conducive to boosting investment into that country.

Some have argued that the liquidity crunch this is causing is creating space for the reintroduction of the Zimbabwean dollar. I disagree.

The problem with this train of thought is that until the country’s underlying problems – including the lack of investor confidence – are dealt with, reintroducing the currency will not fix anything. All it will do is set the stage for a return of the hyperinflation that cost everybody so dearly.

That is not to say that things should stay as they are. Perhaps, rather than reintroducing the Zimbabwean dollar, policy makers should consider Zimbabwean economist Gilbert Muponda’s excellent suggestion and officially make the rand the only currency that gets used in Zimbabwe and that the US dollar, pound, pula and all the others that are now being used get removed from local circulation.

This would make sense as an interim measure on the road to restoring Zimbabwe’s financial sovereignty and when the time is right, which I believe it will be at some point, the Zimbabwean dollar can be reintroduced.

The rand would work better for Zimbabwe than the dollar or the pound as it is a fairly weak currency. This can be useful when you’re trying to build up exports and develop a domestic manufacturing base. Although South Africa is so much bigger than Zimbabwe, it shares many of the same developing-country characteristics.

I believe the reality is that Zimbabwe has everything required for a healthy economy. It just needs to be unlocked.

While its human and physical capital have been degraded, there is a rising corps of sensible, educated and pragmatic leaders who have what it takes to get things right again. And taking care of the business climate and the basics, such as the current cash shortage, is the right place to start.