CZI advocates for return to Zim dollar

CZI calls for RBZ to state how much forex is available before the auction - Techzim

Zim Now Writer

The Confederation of Zimbabwe Industries has said as much as the migration to use of US$ may seem favourable, complete dollarisation has more negatives on the economy than positives.

“Complete use of dollars would cause economic contraction as the country migrates to a high-cost economy which will make it difficult for local firms to compete on the international market.

“Restricting the central bank’s lender of last resort function would also help as it might not be able to act to assist banks in distress and avert a financial system crisis,” CZI noted .

The CZI said complete dollarisation would lead to huge current account shortfalls as it becomes cheaper for economic agents holding US$ balances to import.

The confederation recommended that the government enforce a chain of reforms to prevent the loss of relevance of the ZWL$ including migrating some taxes to being payable only in local currency.

“PAYE would be a good start as this would bring many institutions, including foreign missions, into the foreign exchange market as sellers.

“Smoothening of Government Ministries’ payment methods is also ideal to avoid liquidity disruptions from simultaneous payments at some specific point due to delays,” CZI also said.

The confederation added that the stability of the exchange rate would also eliminate inflation and stabilise the local currency.