HARARE, June 6 (The Source) – Zimbabwean banks have called for the adoption of the South African rand as the main currency of exchange arguing that use of the United States dollar was no longer sustainable.
Zimbabwe dumped its hyperinflation-ravaged local currency in 2009, adopting a basket of foreign currencies, mainly the US dollar, South African Rand, Botswana Pula and Euro.
Use of the US dollar has, however, surpassed all other currencies as the greenback gained against all major currencies.
The central bank pits use of the US dollar in Zimbabwe to be currently around 95 percent from 49 percent in 2009.
The southern African country is currently in the throes of a deep dollar shortage, blamed by government on an ever widening trade gap and the collapse of domestic production.
The central bank on May 4 announced the introducion of bond notes to tackle the cash shortages, but the five-month gap between the announcement and their planned October introduction has left banks open to a run on deposits by clients who fear the return of a loathed local currency.
Businesses are facing a slowdown in activity as spending collapses.
Bankers Association Zimbabwe (BAZ) president Charity Jinya on Monday told a parliamentary committee on finance that use of the South African rand would be prudent given the level of trade between the two countries.
South Africa is Zimbabwe’s largest trading partner, accounting for about 70 percent of imported goods on the local market. Zimbabwe’s exports on the other hand have tailed off due to the strength of the greenback against regional currencies which rendered them more costly.
“It is not sustainable for the US dollar to continue as the major transacting currency so we would recommend that the South African rand be used as the main transacting currency. This would reduce concentration of risk on the US dollar,” said Jinya, who heads MBCA Bank, a subsidiary of South Africa’s Nedbank.
“We also recommend that the US dollar be reserved to make off shore payments and local electronic payments that will reduce the amount of US dollars likely to leave the borders of Zimbabwe through unofficial means.”
The International Monetary Fund last week said Zimbabwe’s cash shortage is the result of weak external inflows and a decline in commodity prices, made worse by a high food import bill due to drought.
Cumulatively, the country has a $20 billion trade deficit since dollarizing.