Monday, March 23, 2009

Zimbabwe will not 'randify' its economy

Business Report - 20/03/2009

The Zimbabwe government has chosen the South African rand as the country’s reference currency but will not "randify" the economy, the Herald reported on Friday.

"The multiple currency system adopted last month remains in force," it said.

Citing Finance Minister Tendai Biti, the report said the government had chosen the rand because South Africa was Zimbabwe’s biggest trading partner and the most competitive country for assessing prices and wages.

"Given the United States dollar price structure we are starting with, and the impossibility of restoring competitiveness through currency devaluation when we are using foreign currencies, it is important that we link ourselves to a currency that is more proximate to us," Biti was quoted as saying.

The choice of the currency was determined by economic factors as well as the future intention of the Southern African Development Community to adopt a common currency, which inevitably would have to be based on the rand given the dominance of the South African economy in the region, the Herald said.

Opting for the rand as the reference currency should in no way reduce government’s commitment to multiple currency use, Biti was quoted as saying.

"It is, however, the first step in anticipating an epoch when we can resume use of the Zimbabwe dollar," he said.

It was, nonetheless, necessary to first restore the multi-currency economy to a reasonable and sustainable level of activity.

The Zimbabwe government adopted a multiple currency trading system in February whereby the rand, the US dollar and Botswana pula operate as legal tender alongside the Zimbabwean dollar.