JOHANNESBURG A top South African economist last week urged Zimbabwe to join the rand monetary union, saying the move would benefit both countries, cut transaction costs and help boost recovery of Zimbabwes shattered economy. (Pictured: The US dollar is widely in circulation in Zimbabwe since the government allowed use of multiple foreign currenc“It makes the best sense to adopt the rand specifically because of the closeness of the economic relationship,” said Chris Hart, an economist at Investment Solutions, a local investment management firm.
“It will help to reduce transaction costs and ultimately set the country on the path to recovery. I definitely believe this is the right way for Zimbabwe to go,” Hart told South African media last Wednesday. He said the benefits of Zimbabwe adopting the rand outweigh the costs to South Africa.
“At this stage the pressure on South Africa’s social services is probably greater if we have Zimbabwe as a dysfunctional neighbour,” he said.
“We also need to bear in mind that in terms of relative size you are talking about an economy worth US$240bn to US$250bn in the case of South Africa, as opposed to US$2bn to US$3bn in the case of Zimbabwe.”
Harare instituted the use of multiple foreign currencies alongside the Zimbabwe dollar in January in a move analysts said was an acknowledgement of the collapse of the local currency due to hyperinflation the most visible sign of a severe economic crisis blamed on President Robert Mugabe’s controversial policies.
In March the new unity governments Finance Minister Tendai Biti announced the death of the Zimbabwe dollar. Since then debate on whether to return the local currency has intensified because the US dollar was unavailable to a majority of people in the countryside.
Zimbabwes Industry Minister Welshman Ncube last Tuesday said the southern African country would explore the possibility of joining the rand monetary union to end the use of multiple currencies.
“We cannot re-enter the Zimbabwe dollar without the economy to support that, we need another solution. We cannot continue forever with multiple currencies,” Ncube told the international media at an Africa forum in London.
“If we can at least join the rand monetary union, we will have money allocated to Zimbabwe through that system,” he added. Ncube said Bitis mid-term monetary review, due on July 14, would include a report on the implications of joining the rand monetary union.
The rand monetary union is currently made up of Namibia, Swaziland and Lesotho who all use the South African rand alongside their own currencies and their foreign exchange regulations and monetary policies are in line with those adopted by the South African Reserve Bank.
Post published in: Agriculture