Change crisis needs smart solutions

The introduction of the multi currency system in 2009, although it has helped to improve the economy, has seen a change crisis due to lack of US dollar coins.

Clémence Machadu.
Clémence Machadu.

The lack of change causes distortions in the pricing system, where virtually everything is approximated to one dollar, which is not only inflationary; but also shortchanges the consumers.

Where no approximation is done and the exact prices are charged, customers are forced to buy small items like condoms, matches, razor blades, bubble gum and sweets in place of change which they are owed.

Some supermarkets have tried to be innovative by issuing vouchers although these limit customers’ choice because it means they have to go back to the same supermarket.

Attempts to use the R8 million worth of coins imported from South Africa, by the banks, were not fruitful after retailers rejected Rand coins, citing exchange rate difficulties. Retailers feared to lose out.

The Finance Ministry promised to source coins from the US in partnership with the Bankers Association of Zimbabwe (BAZ). However BAZ has indicated that it is not aware of any plans to import coins.

It has emerged that it costs about $2 to import coins worth $1 from the US to Zimbabwe; and players in the banking sector, driven by self interest, do not find any incentive in importing the coins. The other challenge has been the absence of a concrete plan between the Ministry of Finance and the US to import coins.

Solutions

There is need to introduce the use of plastic money while other smarter solutions are being looked into.

Zimbabwe needs to consider minting its own coins, which would be backed by the US dollar, to redress the change problem. Ecuador, for example, which has had a dollarised economy for years mints coins locally which have a fixed value relative to the US dollar. The amount of coins to mint would be determined by the amount of notes currently in circulation.

The use of the Zimbabwe dollar coins could also be an alternative, although the obvious disadvantage is that many households are in possession of the coins. This would create increased consumption by margins disproportional to production and accelerate the general price level. – Clémence is a leading economic analyst. He worked for COMESA as a Private Sector Expert, and for CZI as an Industrial Economist.

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