Sat Oct 22 23:36:14 SAST 2016

Foreign currency in power

By unknown | Jan 28, 2009 | COMMENTS [ 0 ]

Godfrey Marawanyika

Godfrey Marawanyika

Zimbabwe has become a de facto dollar state as its tottering economy battles chronic hyper-inflation that has eroded the local currency. But analysts say that the dollarisation is merely a quick fix.

Most monetary transactions in Zimbabwe are now conducted in South African rands, Botswana pulas, US dollars and British pounds since businesses were licensed by the central bank to trade in foreign currency four months ago.

A passport now costs US$670 (about R6709), state-run newspapers cost a dollar (about R10) and transport operators charge about R10 a trip.

But Professor Anthony Hawkins, an economics lecturer at the University of Zimbabwe, said that although the dollarisation was a logical move, it will not end the country's woes.

"This is an exercise which does not solve anything, now everyone has to be paid in foreign currency. Not everyone has foreign currency. The only solution is a political one," Hawkins said.

In a bid to discourage payments in local currency, Air Zimbabwe charges 19 quintillion Zimbabwean dollars or R2152 for a return flight from Harare to Bulawayo.

The country's world record hyper-inflationary environment has led the central bank to slash 13 zeros from the local unit over the past three years in a bid to make the currency more manageable.

Earlier this month the bank indicated it would introduce a 100 trillion dollar note in its latest attempt to keep pace with conditions that has left its once vibrant economy in tatters.

Zimbabwe Congress of Trade Unions acting secretary general Gideon Shoko said that since most goods and services are now being charged in foreign currency, workers must also be paid in hard currency.

"Everyone is charging in foreign currency, even vegetables vendors are selling their goods in foreign currency," Shoko said.

But most workers are not going to work because they cannot afford the transport fees, he said, raising questions of where ordinary Zimbabweans paid in local money were to source foreign currency.

Banks are now competing for clients to open foreign currency accounts, but despite the proliferation of the US dollar, consumers are short changed as shops do not have coins in stock.

Independent Harare-based economist, Charles Tichaona, said the dollarisation of the economy was only good for the short term.

"The local unit has lost attributes of being a currency as evidenced by the fact that almost every corner of the country is now trading foreign currency," he said.

Adding to the Zimbabwe's problems are consecutive years of drought. - Sapa-AFP


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