HARARE The government is in the final stages of negotiations with South Africa for Zimbabwe to adopt the rand as its official currency at least until 2012, according to a source in the ministry of finance.As you may be aware, we have been working with a team from the International Monetary Fund on a number of issues including the currency.
The IMF has proposed that we use the rand because it is stable. In fact it has been gaining against major currencies
and that could even work in our favour. The government has taken the decision to adopt the rand because it is the most
practical route to take, a senior official, who asked not to be named, told The Zimbabwean .
He was responding to questions about Finance Minister Tendai Bitis proposal to bring in lower denominations of
international currencies now in circulation in Zimbabwe.
Treasury will facilitate 2010 the importation of foreign smaller denominations and coins, Biti told Parliament last week.
Consumers welcomed the plan, saying they were being forced to pay more for goods and services as businesses
rounded off prices. They were also being made to buy things they did not need as retailers and service providers said
they did not have change. But economists warn that technical and political problems could prevent it.
The IMF has also proposed that Zimbabwe join the Southern African Customs Union (SACU), in which SA is the dominant player.
Other members of SACU are Botswana, Namibia, Lesotho and Swaziland. Earlier attempts by Zimbabwe to join SACU failed as the countrys rate of inflation was considered too high and the Zimdollar too volatile. But the adoption of multiple currencies and the lowering of the inflation rate appear to have encouraged the SACU to reconsider its position.
If Zimbabwe joined the South African Customs Union, a hard peg to the rand would reinforce economic integration with South Africa and the countries pegged to the rand in part owing tothe absence of exchange rate fluctuations. This would contribute to lower real effective exchange rate volatility. In the case of Zimbabwe, the South African rand and the US
dollar have been considered as possible anchor currencies, said the IMFs Africa department in a report entitled
Zimbabwe: Challenges and Policy Options after Hyperinflation, published at the end of June.
Post published in: World News