Story by Davison Vandira
THE Reserve Bank of Zimbabwe has reiterated that the dual currency system will continue as the country cannot sustain full dollarisation.
The downward slide of the exchange rate in recent days prompted the private sector under the umbrella of CEO Africa Roundtable to engage the Reserve Bank of Zimbabwe in Harare this Thursday.
The candid exchange between business and the monetary authorities revealed that the current productive capacity and structure of the Zimbabwean economy cannot sustain full dollarisation without encountering challenges.
The issue was further clarified by Reserve Bank of Zimbabwe Director for Research, Dr Nebson Mupunga, who noted that the exchange rate is expected to stabilise in the medium to long term after recent monetary policy interventions.
“As an economy our macro-economic fundamentals are not in a position to support full dollarisation for a very long period hence this route is not an option at any given time as such we are exploring ways of determining the equilibrium position of our currency against the US dollar and once that is achieved will continue supporting our local unit through creating demand for it,” he said.
Among proposals by economists and academia on how to tame exchange rate instability is the need for government to create demand for local currency by reducing money supply growth and ensuring that it is the preferred currency for transactions.
