HARARE -- Reserve Bank of Zimbabwe (RBZ) governor Gideon Gono only agreed to change his position on bring back the Zimbabwe dollar after a stormy meeting last week with President Robert Mugabe and Finance Minister Tendai Biti, according to sources. In an embarrassing climb-down, Gono now says Zimbabwe will continue using foreign the US dollar and other hard currencies introduced at the beginning of the year until the economy has reached annual growth rates of at “least seven percent” with foreign currency reserves of at least US$1.5 billion dollars.
The RBZ chief had previously suggested reviving the dead currency and linking it to gold reserves held in the country. A highly placed official source said Gono recanted his call for the return of the Zimdollar after a heated meeting with Mugabe, Vice President Joice Mujuru, Deputy Prime Minister Arthur Mutambara and Biti held after Cabinet meeting last Tuesday.
The Zimbabwean on Tuesday heard that the meeting discussed among other issues the 2010 national budget, use of special drawing rights from the IMF, the revival of the Zimdollar and bankrolling the agricultural season.
Biti was said to have emerged from that meeting with a ringing endorsement from all the principals that returning the Zimdollar would be disastrous for Zimbabwe. Gono, has differed with Finance Minister Tendai Biti, who has declared that he will not put the local dollar back into circulation until economic productivity is restored with and capacity utilisation in industry has reached at least 60 percent.
The RBZ boss has enjoyed support from Mugabe who is keen to see the return of the local currency saying the US dollar has made life difficult for rural dwellers who have traditionally backed his Zanu (PF) party. But Biti has insisted that the return of local currency would render futile all efforts undertaken to revive the economy since formation of the unity government in February.
Biti, who is due to present the 2010 national budget on December 2, has insisted that he cannot return the Zimbabwe dollar unless the economy can sustain it. ? The Zimbabwean economy, currently with exports of only nine percent of GDP and a huge balance of payments deficit, cannot provide any form of cover to the Zimbabwe dollar if returned back into circulation. ??
Biti has intimated that he can only return the inflation-prone currency when exports are at least 30 percent of GDP.
Post published in: Mining