Outline clear currency reform roadmap, Government urged
Nqobile Bhebhe in Victoria Falls
GOVERNMENT has been urged to outline a clear currency reform road map to curb money supply growth, which feeds into exchange rate and inflation instability as this has the potential of derailing economic growth.
Stakeholders attending the just ended Zimbabwe Economic Development Conference (ZEDCON) in Victoria Falls held under the theme: “Public and Private Resource Mobilisation for Sustainable Development”, made several key recommendations aimed at cementing and accelerating economic growth.
Outlining the recommendations, Finance, Economic Development and Investment Promotion permanent secretary, Mr George Guvamatanga, said participants identified inflation and exchange rate instability as a major challenge facing the economy with a potential to compromise medium to long term economic growth prospects of the economy.
“Stakeholders identified inflation and exchange rate instability as a major challenge facing the economy with potential to compromise medium to long term economic growth prospects of the economy,” he said.
“The scourge is negatively affecting mostly the poor and low-income earners. The instability was identified as mainly emanating from money supply growth, which is feeding into exchange rate and inflation instability.
“Therefore, the recommendation was for the Government and the Central Bank to curb money supply growth and refine the foreign exchange system towards a market determined to achieve the desired stability,” said Mr Guvamatanga.
The outcomes from the conference are expected to contribute to the formulation of the 2024 National Budget and review of the National Development Strategy 1 (NDS1).
To ensure long term economic growth, stakeholders recommended that the country should move towards the mainstreaming the use of local currency.
However, it was recommended that the Government should adopt a gradual de-dollarisation process accompanied by necessary incentives instead of forced/ big bang approach, learning from other countries’ experiences.
The Treasury has assured the market of continued usage of the local currency and that deliberate steps are being taken to strengthen its value so as to restore consumer purchasing power and buttress the economic recovery momentum.
The Government has also said it will not renege on its policy to mainstream the use of the local currency as this has yielded a positive impact on the overall economy.
Zimbabwe adopted a multicurrency regime dominated by the US dollar in February 2009 as the economic meltdown resulted in record inflation, which peaked in 2008.
The country is now using a dual currency monetary regime, a situation that has also been blamed for the volatility of the domestic unit due to the strong preference for US dollars, which now accounts for over 76 percent of transactions.
Notably though, wider use of and trade in local currencies can strengthen a nation’s economic autonomy and sovereignty.
Relying on a foreign currency for local and international transactions can create vulnerabilities and limit a country’s ability to pursue its economic policies independently.
By utilising local currencies, countries can assert greater control over their monetary policy, manage capital flows, and protect their economic interests. This enhanced autonomy enables nations to respond effectively to economic challenges and tailor their policies to specific domestic needs, fostering sustainable development and inclusive growth.
Trade in local currencies strengthens a nation’s economic autonomy and sovereignty. Stakeholders requested that Government provides the market and the economy with a clear currency reform roadmap as the financial sector is now hesitant to extend long-term foreign currency loans as the 2025 deadline looms.
Added to that, to ensure value for money and curb corruption both in public and private sector, stakeholders recommended innovative ways of adopting e-procurement management system that eliminates human interface and promotes efficiency.
There was also a general consensus on the need to explore domestic alternative ways of financing beyond the existing revenue streams, taking into account that the country is under sanctions and highly indebted.
“In view of this, researchers made several recommendations including that Government should develop comprehensive climate legislative frameworks, which will enable the country to tap into global climate financing sources such as green bonds and carbon credit.
“This should be complemented by development of the market for issuance of green bonds underpinned by a conducive macro-economic environment,” reads part of the recommendations.
The Government was also urged to extensively explore public-private partnerships (PPPs) as a form of financing.
One of the necessary conditions for their success was identified as investment in project preparatory activities such as feasibility studies in order to ensure bankability.
Development partner support was identified as a potential source of additional financing under appropriate structuring.
The conference also tackled measures to be taken to enhance the role of the private sector and leveraging the informal sector for development.
Delegates unpacked the prevailing capital market infrastructure and how it can be fully utilised for sustainable capital raising to achieve sustainable development.